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Hedge Funds Are Piling Into Penumbra Inc (PEN)

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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Penumbra Inc (NYSE:PEN) to find out whether there were any major changes in hedge funds' views.

Penumbra Inc (NYSE:PEN) shareholders have witnessed an increase in activity from the world's largest hedge funds in recent months. Penumbra Inc (NYSE:PEN) was in 30 hedge funds' portfolios at the end of the second 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. There were 27 hedge funds in our database with PEN holdings at the end of March. Our calculations also showed that PEN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are tons of gauges market participants employ to evaluate their holdings. A duo of the most innovative gauges are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best money managers can trounce the market by a solid amount (see the details here). 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 Blood
David Blood

David Blood of Generation Investment 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. With all of this in mind we're going to take a look at the recent hedge fund action encompassing Penumbra Inc (NYSE:PEN).

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

At second quarter's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the first quarter of 2020. On the other hand, there were a total of 20 hedge funds with a bullish position in PEN a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Ken Griffin's Citadel Investment Group has the most valuable position in Penumbra Inc (NYSE:PEN), worth close to $132.8 million, comprising less than 0.1%% of its total 13F portfolio. On Citadel Investment Group's heels is Generation Investment Management, managed by David Blood and Al Gore, which holds a $126.5 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism contain Israel Englander's Millennium Management, Phill Gross and Robert Atchinson's Adage Capital Management and Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Engine No. 1 LLC allocated the biggest weight to Penumbra Inc (NYSE:PEN), around 1.99% of its 13F portfolio. Partner Fund Management is also relatively very bullish on the stock, earmarking 1.15 percent of its 13F equity portfolio to PEN.

As aggregate interest increased, key hedge funds were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in Penumbra Inc (NYSE:PEN). Balyasny Asset Management had $15.1 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $11.2 million position during the quarter. The other funds with new positions in the stock are Brian Ashford-Russell and Tim Woolley's Polar Capital, Michael Gelband's ExodusPoint Capital, and Brandon Haley's Holocene Advisors.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Penumbra Inc (NYSE:PEN) but similarly valued. We will take a look at Carlisle Companies, Inc. (NYSE:CSL), Natera Inc (NASDAQ:NTRA), Banco de Chile (NYSE:BCH), Dolby Laboratories, Inc. (NYSE:DLB), Comerica Incorporated (NYSE:CMA), Beyond Meat, Inc. (NASDAQ:BYND), and DXC Technology Company (NYSE:DXC). All of these stocks' market caps match PEN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSL,17,146681,-1 NTRA,52,1896341,11 BCH,7,45933,2 DLB,31,748482,-3 CMA,33,547103,1 BYND,17,170584,-9 DXC,30,851210,2 Average,26.7,629476,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $629 million. That figure was $571 million in PEN's case. Natera Inc (NASDAQ:NTRA) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 7 bullish hedge fund positions. Penumbra Inc (NYSE:PEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PEN is 63.6. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately PEN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on PEN were disappointed as the stock returned -2.3% since the end of June (through 10/15) 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 many of these stocks already outperformed the market since 2019.

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