Insider Monkey has processed numerous 13F filings of hedge funds and successful investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find write-ups about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of Palo Alto Networks Inc (NYSE:PANW) based on that data.
Is Palo Alto Networks Inc (NYSE:PANW) a buy here? The best stock pickers are getting less optimistic. The number of long hedge fund positions dropped by 2 lately. Our calculations also showed that panw 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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let's take a peek at the latest hedge fund action encompassing Palo Alto Networks Inc (NYSE:PANW).
Hedge fund activity in Palo Alto Networks Inc (NYSE:PANW)
Heading into the second quarter of 2019, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PANW over the last 15 quarters. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Palo Alto Networks Inc (NYSE:PANW), which was worth $1089.1 million at the end of the first quarter. On the second spot was Two Sigma Advisors which amassed $275.9 million worth of shares. Moreover, Cadian Capital, D E Shaw, and Millennium Management were also bullish on Palo Alto Networks Inc (NYSE:PANW), allocating a large percentage of their portfolios to this stock.
Because Palo Alto Networks Inc (NYSE:PANW) has faced bearish sentiment from hedge fund managers, it's easy to see that there exists a select few hedgies who were dropping their positions entirely in the third quarter. It's worth mentioning that Anand Parekh's Alyeska Investment Group sold off the biggest stake of all the hedgies monitored by Insider Monkey, valued at an estimated $94.9 million in stock, and Josh Resnick's Jericho Capital Asset Management was right behind this move, as the fund dumped about $60.1 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Palo Alto Networks Inc (NYSE:PANW) but similarly valued. These stocks are Ventas, Inc. (NYSE:VTR), Align Technology, Inc. (NASDAQ:ALGN), Anadarko Petroleum Corporation (NYSE:APC), and Willis Towers Watson Public Limited Company (NASDAQ:WLTW). This group of stocks' market valuations match PANW's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VTR,19,300131,5 ALGN,30,1756917,-7 APC,50,2096400,-4 WLTW,33,1631672,8 Average,33,1446280,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1446 million. That figure was $2558 million in PANW's case. Anadarko Petroleum Corporation (NYSE:APC) is the most popular stock in this table. On the other hand Ventas, Inc. (NYSE:VTR) is the least popular one with only 19 bullish hedge fund positions. Palo Alto Networks Inc (NYSE:PANW) 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 PANW wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PANW were disappointed as the stock returned -15.9% 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.