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Hedge Funds Have Never Been This Bullish On Pentair plc (PNR)

Nina Todic

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of March. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Pentair plc (NYSE:PNR), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Pentair plc (NYSE:PNR) has experienced an increase in activity from the world's largest hedge funds of late. PNR was in 28 hedge funds' portfolios at the end of the first quarter of 2019. There were 25 hedge funds in our database with PNR positions at the end of the previous quarter. Our calculations also showed that pnr isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT

We're going to take a gander at the new hedge fund action surrounding Pentair plc (NYSE:PNR).

How are hedge funds trading Pentair plc (NYSE:PNR)?

Heading into the second quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in PNR a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

No of Hedge Funds with PNR Positions

More specifically, Impax Asset Management was the largest shareholder of Pentair plc (NYSE:PNR), with a stake worth $221.9 million reported as of the end of March. Trailing Impax Asset Management was Citadel Investment Group, which amassed a stake valued at $154.5 million. Two Sigma Advisors, D E Shaw, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

Now, key hedge funds were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, established the biggest position in Pentair plc (NYSE:PNR). Scopus Asset Management had $19.1 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $18.6 million position during the quarter. The other funds with new positions in the stock are Gregg Moskowitz's Interval Partners, Sara Nainzadeh's Centenus Global Management, and Jeffrey Talpins's Element Capital Management.

Let's check out hedge fund activity in other stocks similar to Pentair plc (NYSE:PNR). These stocks are RPM International Inc. (NYSE:RPM), US Foods Holding Corp. (NYSE:USFD), Nordson Corporation (NASDAQ:NDSN), and L Brands Inc (NYSE:LB). All of these stocks' market caps are closest to PNR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RPM,21,384411,-2 USFD,40,1340524,-1 NDSN,13,33215,-6 LB,32,709689,-3 Average,26.5,616960,-3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $617 million. That figure was $675 million in PNR's case. US Foods Holding Corp. (NYSE:USFD) is the most popular stock in this table. On the other hand Nordson Corporation (NASDAQ:NDSN) is the least popular one with only 13 bullish hedge fund positions. Pentair plc (NYSE:PNR) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately PNR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PNR were disappointed as the stock returned -19.9% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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