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Is Pivotal Software, Inc. (PVTL) Going to Burn These Hedge Funds?

Reymerlyn Martin

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is Pivotal Software, Inc. (NYSE:PVTL) a buy, sell, or hold? Prominent investors are in a bearish mood. The number of bullish hedge fund bets were trimmed by 3 lately. Our calculations also showed that PVTL isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny

Let's take a look at the new hedge fund action regarding Pivotal Software, Inc. (NYSE:PVTL).

How have hedgies been trading Pivotal Software, Inc. (NYSE:PVTL)?

At Q3's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards PVTL over the last 13 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

PVTL_dec2018

Among these funds, Steadfast Capital Management held the most valuable stake in Pivotal Software, Inc. (NYSE:PVTL), which was worth $54 million at the end of the third quarter. On the second spot was Jericho Capital Asset Management which amassed $45.6 million worth of shares. Moreover, Alkeon Capital Management, Balyasny Asset Management, and SQN Investors were also bullish on Pivotal Software, Inc. (NYSE:PVTL), allocating a large percentage of their portfolios to this stock.

Because Pivotal Software, Inc. (NYSE:PVTL) has faced bearish sentiment from the smart money, it's safe to say that there was a specific group of fund managers who sold off their positions entirely last quarter. Interestingly, James Crichton's Hitchwood Capital Management sold off the largest stake of the "upper crust" of funds watched by Insider Monkey, totaling about $14.6 million in stock, and Daniel S. Och's OZ Management was right behind this move, as the fund cut about $8.5 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds last quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Pivotal Software, Inc. (NYSE:PVTL) but similarly valued. These stocks are Stericycle Inc (NASDAQ:SRCL), Vermilion Energy Inc (NYSE:VET), Landstar System, Inc. (NASDAQ:LSTR), and Lions Gate Entertainment Corporation (NYSE:LGF-A). All of these stocks' market caps are similar to PVTL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SRCL,20,270362,-4 VET,9,32842,0 LSTR,28,269923,5 LGF-A,17,476276,0 Average,18.5,262351,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $262 million. That figure was $314 million in PVTL's case. Landstar System, Inc. (NASDAQ:LSTR) is the most popular stock in this table. On the other hand Vermilion Energy Inc (NYSE:VET) is the least popular one with only 9 bullish hedge fund positions. Pivotal Software, Inc. (NYSE:PVTL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard LSTR might be a better candidate to consider a long position.

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

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