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Hedge Funds Are Buying Purple Innovation, Inc. (PRPL)

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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Purple Innovation, Inc. (NASDAQ:PRPL) based on those filings.

Is Purple Innovation, Inc. (NASDAQ:PRPL) a buy, sell, or hold? The best stock pickers were taking an optimistic view. The number of long hedge fund bets improved by 1 lately. Purple Innovation, Inc. (NASDAQ:PRPL) was in 25 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 36. Our calculations also showed that PRPL isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

According to most traders, hedge funds are assumed to be unimportant, old financial tools of yesteryear. While there are over 8000 funds in operation at present, We choose to focus on the masters of this club, about 850 funds. It is estimated that this group of investors manage bulk of all hedge funds' total capital, and by monitoring their unrivaled stock picks, Insider Monkey has determined a number of investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

David Brown Hawk Ridge Partners
David Brown Hawk Ridge Partners

David Brown of Hawk Ridge Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Keeping this in mind let's take a look at the fresh hedge fund action surrounding Purple Innovation, Inc. (NASDAQ:PRPL).

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

Heading into the third quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the first quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in PRPL 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 adding to their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Coliseum Capital, managed by Christopher Shackelton and Adam Gray, holds the biggest position in Purple Innovation, Inc. (NASDAQ:PRPL). Coliseum Capital has a $217.6 million position in the stock, comprising 19.3% of its 13F portfolio. Coming in second is Hawk Ridge Management, managed by David Brown, which holds a $56 million position; 4% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish consist of James Woodson Davis's Woodson Capital Management, Alok Agrawal's Bloom Tree Partners and Glen Kacher's Light Street Capital. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to Purple Innovation, Inc. (NASDAQ:PRPL), around 19.3% of its 13F portfolio. Bayberry Capital Partners is also relatively very bullish on the stock, setting aside 6.36 percent of its 13F equity portfolio to PRPL.

As aggregate interest increased, key hedge funds have jumped into Purple Innovation, Inc. (NASDAQ:PRPL) headfirst. Stony Point Capital, managed by Richard Walters II, assembled the largest position in Purple Innovation, Inc. (NASDAQ:PRPL). Stony Point Capital had $7.1 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also made a $5.3 million investment in the stock during the quarter. The following funds were also among the new PRPL investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Matthew L Pinz's Pinz Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Purple Innovation, Inc. (NASDAQ:PRPL) but similarly valued. We will take a look at LendingClub Corp (NYSE:LC), PRA Group, Inc. (NASDAQ:PRAA), Adtalem Global Education Inc. (NYSE:ATGE), Tattooed Chef, Inc. (NASDAQ:TTCF), Super Micro Computer, Inc. (NASDAQ:SMCI), Viant Technology Inc. (NASDAQ:DSP), and Hope Bancorp, Inc. (NASDAQ:HOPE). All of these stocks' market caps resemble PRPL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LC,23,375062,4 PRAA,15,48282,0 ATGE,19,295188,-3 TTCF,7,38898,-3 SMCI,20,373688,-1 DSP,6,12575,-8 HOPE,16,78597,3 Average,15.1,174613,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $460 million in PRPL's case. LendingClub Corp (NYSE:LC) is the most popular stock in this table. On the other hand Viant Technology Inc. (NASDAQ:DSP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Purple Innovation, Inc. (NASDAQ:PRPL) is more popular among hedge funds. Our overall hedge fund sentiment score for PRPL is 76.8. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Unfortunately PRPL wasn't nearly as popular as these 5 stocks and hedge funds that were betting on PRPL were disappointed as the stock returned -22.9% since the end of the second quarter (through 10/22) 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 since 2019.

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