Was The Smart Money Right About PagerDuty, Inc. (PD)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded PagerDuty, Inc. (NYSE:PD) and determine whether the smart money was really smart about this stock.

PagerDuty, Inc. (NYSE:PD) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. PD has seen an increase in support from the world’s most elite money managers recently. There were 26 hedge funds in our database with PD holdings at the end of June. Our calculations also showed that PD 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. Keeping this in mind let’s take a glance at the fresh hedge fund action encompassing PagerDuty, Inc. (NYSE:PD).

Robert Moses of RGM Capital

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

Heading into the fourth quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the second quarter of 2021. On the other hand, there were a total of 28 hedge funds with a bullish position in PD a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, ARK Investment Management, managed by Catherine D. Wood, holds the largest position in PagerDuty, Inc. (NYSE:PD). ARK Investment Management has a $414.1 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by RGM Capital, led by Robert G. Moses, holding a $61.6 million position; the fund has 3% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Steve Cohen’s Point72 Asset Management, Brian Bares’s Bares Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position RGM Capital allocated the biggest weight to PagerDuty, Inc. (NYSE:PD), around 3.02% of its 13F portfolio. Provenire Capital is also relatively very bullish on the stock, designating 2.81 percent of its 13F equity portfolio to PD.

As aggregate interest increased, some big names were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, created the biggest position in PagerDuty, Inc. (NYSE:PD). Point72 Asset Management had $50.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $20.4 million position during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Donald Sussman’s Paloma Partners, and Anthony S. Daffer’s Provenire Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as PagerDuty, Inc. (NYSE:PD) but similarly valued. These stocks are Allegiant Travel Company (NASDAQ:ALGT), Methanex Corporation (NASDAQ:MEOH), Matson Inc. (NYSE:MATX), Triton International Limited (NYSE:TRTN), Chimera Investment Corporation (NYSE:CIM), Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), and LGI Homes Inc (NASDAQ:LGIH). All of these stocks’ market caps match PD’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $820 million in PD’s case. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) is the most popular stock in this table. On the other hand Matson Inc. (NYSE:MATX) is the least popular one with only 13 bullish hedge fund positions. PagerDuty, Inc. (NYSE:PD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PD is 81.5. 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 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, PD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PD were disappointed as the stock returned -20.3% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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