We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Pivotal Software, Inc. (NYSE:PVTL).
Pivotal Software, Inc. (NYSE:PVTL) shareholders have witnessed an increase in enthusiasm from smart money of late. Our calculations also showed that PVTL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_731850" align="aligncenter" width="1680"] Paul Glazer of Glazer Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the fresh hedge fund action surrounding Pivotal Software, Inc. (NYSE:PVTL).
What does smart money think about Pivotal Software, Inc. (NYSE:PVTL)?
At Q3's end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PVTL over the last 17 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Pivotal Software, Inc. (NYSE:PVTL), with a stake worth $54.6 million reported as of the end of September. Trailing Renaissance Technologies was Carlson Capital, which amassed a stake valued at $29.4 million. Halcyon Asset Management, Pentwater Capital Management, and Glazer Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Whetstone Capital Advisors allocated the biggest weight to Pivotal Software, Inc. (NYSE:PVTL), around 5.16% of its 13F portfolio. One Fin Capital Management is also relatively very bullish on the stock, dishing out 5.03 percent of its 13F equity portfolio to PVTL.
As industrywide interest jumped, key money managers were leading the bulls' herd. Carlson Capital, managed by Clint Carlson, established the largest position in Pivotal Software, Inc. (NYSE:PVTL). Carlson Capital had $29.4 million invested in the company at the end of the quarter. John Bader's Halcyon Asset Management also made a $27.6 million investment in the stock during the quarter. The following funds were also among the new PVTL investors: Matthew Halbower's Pentwater Capital Management, Paul Glazer's Glazer Capital, and Carl Tiedemann and Michael Tiedemann's TIG Advisors.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Pivotal Software, Inc. (NYSE:PVTL) but similarly valued. These stocks are frontdoor, inc. (NASDAQ:FTDR), Compania Cervecerias Unidas S.A. (NYSE:CCU), Cabot Microelectronics Corporation (NASDAQ:CCMP), and NCR Corporation (NYSE:NCR). This group of stocks' market caps match PVTL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTDR,38,735584,-2 CCU,9,32949,-1 CCMP,15,348635,2 NCR,31,284836,7 Average,23.25,350501,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $351 million. That figure was $275 million in PVTL's case. frontdoor, inc. (NASDAQ:FTDR) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PVTL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PVTL investors were disappointed as the stock returned 0.7% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.