In this article we will take a look at whether hedge funds think Pentair plc (NYSE:PNR) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Pentair plc (NYSE:PNR) a buy, sell, or hold? The smart money was becoming less hopeful. The number of long hedge fund positions fell by 1 in recent months. Pentair plc (NYSE:PNR) was in 24 hedge funds’ portfolios at the end of September. The all time high for this statistic is 34. Our calculations also showed that PNR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Robert Atchinson of Adage Capital Management
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 let’s take a look at the recent hedge fund action encompassing Pentair plc (NYSE:PNR).
Do Hedge Funds Think PNR Is A Good Stock To Buy Now?
At the end of September, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in PNR a year ago. 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, Impax Asset Management was the largest shareholder of Pentair plc (NYSE:PNR), with a stake worth $658.9 million reported as of the end of September. Trailing Impax Asset Management was Arrowstreet Capital, which amassed a stake valued at $69.8 million. AQR Capital Management, Adage Capital Management, and Citadel Investment Group 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 Impax Asset Management allocated the biggest weight to Pentair plc (NYSE:PNR), around 2.71% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 1.35 percent of its 13F equity portfolio to PNR.
Judging by the fact that Pentair plc (NYSE:PNR) has witnessed bearish sentiment from the smart money, it’s easy to see that there exists a select few hedge funds that decided to sell off their entire stakes by the end of the third quarter. Interestingly, McKinley Capital Management said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising about $7 million in stock. Ray Dalio’s fund, Bridgewater Associates, also dropped its stock, about $2.9 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Pentair plc (NYSE:PNR). We will take a look at NovoCure Limited (NASDAQ:NVCR), Papa Murphy’s Holdings Inc (NASDAQ:FRSH), CF Industries Holdings, Inc. (NYSE:CF), F5 Networks, Inc. (NASDAQ:FFIV), Medical Properties Trust, Inc. (NYSE:MPW), Sasol Limited (NYSE:SSL), and Steel Dynamics, Inc. (NASDAQ:STLD). All of these stocks’ market caps are similar to PNR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVCR | 23 | 241286 | -2 |
| FRSH | 41 | 316230 | 41 |
| CF | 49 | 1272709 | 2 |
| FFIV | 27 | 686095 | -3 |
| MPW | 18 | 365527 | -1 |
| SSL | 4 | 76164 | -1 |
| STLD | 23 | 481466 | -3 |
| Average | 26.4 | 491354 | 4.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $491 million. That figure was $845 million in PNR’s case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 4 bullish hedge fund positions. Pentair plc (NYSE:PNR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PNR is 47.4. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 5.1 percentage points. Unfortunately PNR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PNR investors were disappointed as the stock returned 1.3% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
