Is Pure Storage, Inc. (PSTG) A Good Stock To Buy?

Is Pure Storage, Inc. (NYSE:PSTG) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is PSTG a good stock to buy now? Pure Storage, Inc. (NYSE:PSTG) was in 28 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 35. PSTG has seen a decrease in enthusiasm from smart money lately. There were 31 hedge funds in our database with PSTG holdings at the end of June. Our calculations also showed that PSTG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to review the latest hedge fund action encompassing Pure Storage, Inc. (NYSE:PSTG).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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

Heading into the fourth quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PSTG over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Eminence Capital held the most valuable stake in Pure Storage, Inc. (NYSE:PSTG), which was worth $214.8 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $115.7 million worth of shares. Alyeska Investment Group, D E Shaw, and Millennium Management 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 Eminence Capital allocated the biggest weight to Pure Storage, Inc. (NYSE:PSTG), around 2.9% of its 13F portfolio. Alyeska Investment Group is also relatively very bullish on the stock, designating 0.87 percent of its 13F equity portfolio to PSTG.

Since Pure Storage, Inc. (NYSE:PSTG) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who were dropping their full holdings by the end of the third quarter. At the top of the heap, Catherine D. Wood’s ARK Investment Management said goodbye to the largest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $297.9 million in stock. Renaissance Technologies, also dropped its stock, about $33.2 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Pure Storage, Inc. (NYSE:PSTG) but similarly valued. These stocks are Pinnacle Financial Partners, Inc. (NASDAQ:PNFP), Omega Healthcare Investors Inc (NYSE:OHI), Janus Henderson Group plc (NYSE:JHG), Stifel Financial Corp. (NYSE:SF), Donaldson Company, Inc. (NYSE:DCI), Workiva Inc (NYSE:WK), and Tenet Healthcare Corp (NYSE:THC). All of these stocks’ market caps are closest to PSTG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $676 million. That figure was $714 million in PSTG’s case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand Omega Healthcare Investors Inc (NYSE:OHI) is the least popular one with only 15 bullish hedge fund positions. Pure Storage, Inc. (NYSE:PSTG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PSTG is 46.3. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Hedge funds were also right about betting on PSTG as the stock returned 28.9% since the end of Q3 (through 12/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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