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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 887 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of December 31st, 2020. In this article we are going to take a look at smart money sentiment towards Purple Innovation, Inc. (NASDAQ:PRPL).
Is PRPL stock a buy? Purple Innovation, Inc. (NASDAQ:PRPL) has experienced a decrease in activity from the world's largest hedge funds recently. Purple Innovation, Inc. (NASDAQ:PRPL) was in 33 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 36. Our calculations also showed that PRPL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In today’s marketplace there are many gauges stock market investors can use to grade stocks. Two of the best gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top fund managers can trounce the market by a healthy margin (see the details here).
Glen Kacher of Light Street Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. Keeping this in mind we're going to go over the new hedge fund action surrounding Purple Innovation, Inc. (NASDAQ:PRPL).
Do Hedge Funds Think PRPL Is A Good Stock To Buy Now?
At the end of December, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PRPL over the last 22 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Christopher Shackelton and Adam Gray's Coliseum Capital has the most valuable position in Purple Innovation, Inc. (NASDAQ:PRPL), worth close to $445.7 million, corresponding to 36.6% of its total 13F portfolio. On Coliseum Capital's heels is Glen Kacher of Light Street Capital, with a $109.9 million position; 3.3% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish comprise James Woodson Davis's Woodson Capital Management, David Fiszel's Honeycomb Asset Management and Alok Agrawal's Bloom Tree Partners. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to Purple Innovation, Inc. (NASDAQ:PRPL), around 36.57% of its 13F portfolio. Ararat Capital is also relatively very bullish on the stock, earmarking 8.37 percent of its 13F equity portfolio to PRPL.
Because Purple Innovation, Inc. (NASDAQ:PRPL) has experienced declining sentiment from the aggregate hedge fund industry, it's easy to see that there were a few fund managers that elected to cut their full holdings last quarter. At the top of the heap, Bart Baum's Ionic Capital Management said goodbye to the largest position of all the hedgies watched by Insider Monkey, valued at about $25.4 million in stock. Ken Grossman and Glen Schneider's fund, SG Capital Management, also cut its stock, about $13.2 million worth. These moves are interesting, as total hedge fund interest dropped by 3 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Purple Innovation, Inc. (NASDAQ:PRPL) but similarly valued. These stocks are Docebo Inc. (NASDAQ:DCBO), Magellan Health Inc (NASDAQ:MGLN), Burford Capital Limited (NYSE:BUR), Osisko Gold Royalties Ltd (NYSE:OR), Forward Air Corporation (NASDAQ:FWRD), Minerals Technologies Inc (NYSE:MTX), and Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL). This group of stocks' market valuations match PRPL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DCBO,10,120707,10 MGLN,22,468830,1 BUR,7,40888,7 OR,16,153231,-1 FWRD,11,197827,-4 MTX,11,96157,-3 ZNTL,17,799869,3 Average,13.4,268216,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.4 hedge funds with bullish positions and the average amount invested in these stocks was $268 million. That figure was $986 million in PRPL's case. Magellan Health Inc (NASDAQ:MGLN) is the most popular stock in this table. On the other hand Burford Capital Limited (NYSE:BUR) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Purple Innovation, Inc. (NASDAQ:PRPL) is more popular among hedge funds. Our overall hedge fund sentiment score for PRPL is 79.5. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Unfortunately PRPL wasn't nearly as popular as these 30 stocks and hedge funds that were betting on PRPL were disappointed as the stock returned -4.7% since the end of the fourth quarter (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.