Is PFPT Stock A Buy or Sell?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Proofpoint Inc (NASDAQ:PFPT).

Is PFPT stock a buy? Proofpoint Inc (NASDAQ:PFPT) was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 45. PFPT has seen a decrease in support from the world’s most elite money managers recently. There were 37 hedge funds in our database with PFPT positions at the end of the third quarter. Our calculations also showed that PFPT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s analyze the latest hedge fund action encompassing Proofpoint Inc (NASDAQ:PFPT).

Do Hedge Funds Think PFPT Is A Good Stock To Buy Now?

At Q4’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PFPT over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, RGM Capital was the largest shareholder of Proofpoint Inc (NASDAQ:PFPT), with a stake worth $185.5 million reported as of the end of December. Trailing RGM Capital was Tremblant Capital, which amassed a stake valued at $102.1 million. Two Sigma Advisors, Point72 Asset Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position RGM Capital allocated the biggest weight to Proofpoint Inc (NASDAQ:PFPT), around 8.09% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, dishing out 2.88 percent of its 13F equity portfolio to PFPT.

Judging by the fact that Proofpoint Inc (NASDAQ:PFPT) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that elected to cut their entire stakes last quarter. Interestingly, Kevin Oram and Peter Uddo’s Praesidium Investment Management Company dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at about $47.2 million in stock, and Highbridge Capital Management was right behind this move, as the fund sold off about $24.9 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 11 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Proofpoint Inc (NASDAQ:PFPT) but similarly valued. These stocks are CAE, Inc. (NYSE:CAE), Beyond Meat, Inc. (NASDAQ:BYND), Genpact Limited (NYSE:G), Cemex SAB de CV (NYSE:CX), Williams-Sonoma, Inc. (NYSE:WSM), Eaton Vance Corp (NYSE:EV), and Axon Enterprise, Inc. (NASDAQ:AAXN). This group of stocks’ market valuations are similar to PFPT’s market valuation.

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As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $403 million. That figure was $487 million in PFPT’s case. Axon Enterprise, Inc. (NASDAQ:AAXN) is the most popular stock in this table. On the other hand CAE, Inc. (NYSE:CAE) is the least popular one with only 10 bullish hedge fund positions. Proofpoint Inc (NASDAQ:PFPT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PFPT is 47.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately PFPT wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on PFPT were disappointed as the stock returned -0.6% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.

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