We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Pivotal Software, Inc. (NYSE:PVTL).
Pivotal Software, Inc. (NYSE:PVTL) was in 32 hedge funds' portfolios at the end of December. PVTL investors should pay attention to an increase in hedge fund sentiment lately. There were 18 hedge funds in our database with PVTL positions at the end of the previous quarter. Our calculations also showed that PVTL 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's view the recent hedge fund action surrounding Pivotal Software, Inc. (NYSE:PVTL).
How are hedge funds trading Pivotal Software, Inc. (NYSE:PVTL)?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 78% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PVTL over the last 14 quarters. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Steadfast Capital Management held the most valuable stake in Pivotal Software, Inc. (NYSE:PVTL), which was worth $76.2 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $50.5 million worth of shares. Moreover, SQN Investors, Alkeon Capital Management, and Element Capital Management were also bullish on Pivotal Software, Inc. (NYSE:PVTL), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, created the largest position in Pivotal Software, Inc. (NYSE:PVTL). Laurion Capital Management had $23.7 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $11.4 million investment in the stock during the quarter. The other funds with new positions in the stock are George Baxter's Sabrepoint Capital, Leon Shaulov's Maplelane Capital, and Anand Parekh's Alyeska Investment Group.
Let's now take a look at hedge fund activity in other stocks similar to Pivotal Software, Inc. (NYSE:PVTL). We will take a look at Crane Co. (NYSE:CR), Loxo Oncology Inc (NASDAQ:LOXO), SolarWinds Corporation (NYSE:SWI), and United Microelectronics Corp (NYSE:UMC). This group of stocks' market caps resemble PVTL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CR,23,262775,4 LOXO,28,788056,-2 SWI,15,1989321,15 UMC,17,82238,0 Average,20.75,780598,4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $781 million. That figure was $401 million in PVTL's case. Loxo Oncology Inc (NASDAQ:LOXO) is the most popular stock in this table. On the other hand SolarWinds Corporation (NYSE:SWI) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Pivotal Software, Inc. (NYSE:PVTL) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on PVTL, though not to the same extent, as the stock returned 17% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.