We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Palantir Technologies Inc. (NYSE:PLTR) and determine whether hedge funds skillfully traded this stock.
Is Palantir Technologies Inc. (NYSE:PLTR) ready to rally soon? The smart money was buying. The number of long hedge fund positions rose by 9 lately. Palantir Technologies Inc. (NYSE:PLTR) was in 35 hedge funds’ portfolios at the end of September. The all time high for this statistic is 38. Our calculations also showed that PLTR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Matthew Hulsizer of PEAK6 Capital
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 take a peek at the new hedge fund action encompassing Palantir Technologies Inc. (NYSE:PLTR).
Do Hedge Funds Think PLTR Is A Good Stock To Buy Now?
At third quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 35% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in PLTR over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, ARK Investment Management, managed by Catherine D. Wood, holds the largest position in Palantir Technologies Inc. (NYSE:PLTR). ARK Investment Management has a $895.3 million position in the stock, comprising 2.1% of its 13F portfolio. The second largest stake is Renaissance Technologies, with a $311.5 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism consist of Ken Griffin’s Citadel Investment Group, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Andar Capital allocated the biggest weight to Palantir Technologies Inc. (NYSE:PLTR), around 9.11% of its 13F portfolio. Crestwood Capital Management is also relatively very bullish on the stock, earmarking 6.59 percent of its 13F equity portfolio to PLTR.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. ThornTree Capital Partners, managed by Mark Moore, assembled the largest position in Palantir Technologies Inc. (NYSE:PLTR). ThornTree Capital Partners had $26.2 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $21.9 million investment in the stock during the quarter. The other funds with brand new PLTR positions are Joe DiMenna’s ZWEIG DIMENNA PARTNERS, Kenneth Tropin’s Graham Capital Management, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Palantir Technologies Inc. (NYSE:PLTR). These stocks are The Kraft Heinz Company (NASDAQ:KHC), TE Connectivity Ltd. (NYSE:TEL), Carrier Global Corporation (NYSE:CARR), The Bank of New York Mellon Corporation (NYSE:BK), T. Rowe Price Group, Inc. (NASDAQ:TROW), Kimberly Clark Corporation (NYSE:KMB), and L3Harris Technologies, Inc. (NASDAQ:LHX). This group of stocks’ market caps match PLTR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KHC | 33 | 12321504 | 0 |
| TEL | 41 | 2188058 | 2 |
| CARR | 46 | 1324758 | 0 |
| BK | 46 | 4657475 | -6 |
| TROW | 35 | 471726 | 11 |
| KMB | 28 | 410445 | -9 |
| LHX | 29 | 492448 | -13 |
| Average | 36.9 | 3123773 | -2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.9 hedge funds with bullish positions and the average amount invested in these stocks was $3124 million. That figure was $1635 million in PLTR’s case. Carrier Global Corporation (NYSE:CARR) is the most popular stock in this table. On the other hand Kimberly Clark Corporation (NYSE:KMB) is the least popular one with only 28 bullish hedge fund positions. Palantir Technologies Inc. (NYSE:PLTR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PLTR is 57.1. 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 29.6% in 2021 and surpassed the market again by 3.6 percentage points. Unfortunately, PLTR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PLTR investors were disappointed as the stock returned -43% 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.
Follow Palantir Technologies Inc. (NYSE:PLTR)
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Disclosure: None. This article was originally published at Insider Monkey.
