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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Pure Storage, Inc. (NYSE:PSTG) makes for a good investment right now.
Is PSTG a good stock to buy now? Pure Storage, Inc. (NYSE:PSTG) was in 22 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 35. PSTG shareholders have witnessed a decrease in hedge fund interest recently. There were 29 hedge funds in our database with PSTG positions at the end of the second quarter. Our calculations also showed that PSTG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a multitude of methods stock market investors put to use to evaluate stocks. Two of the most innovative methods are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can beat the market by a solid margin (see the details here).
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now we're going to take a look at the key hedge fund action encompassing Pure Storage, Inc. (NYSE:PSTG).
Do Hedge Funds Think PSTG Is A Good Stock To Buy Now?
At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PSTG over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Eminence Capital was the largest shareholder of Pure Storage, Inc. (NYSE:PSTG), with a stake worth $131.4 million reported as of the end of September. Trailing Eminence Capital was D E Shaw, which amassed a stake valued at $33.5 million. Two Sigma Advisors, Citadel Investment Group, and Citadel Investment Group 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 Eminence Capital allocated the biggest weight to Pure Storage, Inc. (NYSE:PSTG), around 1.29% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.56 percent of its 13F equity portfolio to PSTG.
Seeing as Pure Storage, Inc. (NYSE:PSTG) has experienced a decline in interest from hedge fund managers, it's easy to see that there were a few funds who sold off their full holdings by the end of the third quarter. It's worth mentioning that Renaissance Technologies said goodbye to the largest position of all the hedgies monitored by Insider Monkey, valued at about $20.4 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund dropped about $20.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Pure Storage, Inc. (NYSE:PSTG) but similarly valued. These stocks are Kinsale Capital Group, Inc. (NASDAQ:KNSL), Houlihan Lokey Inc (NYSE:HLI), TFS Financial Corporation (NASDAQ:TFSL), Inovalon Holdings Inc (NASDAQ:INOV), Healthcare Realty Trust Inc (NYSE:HR), SSR Mining Inc. (NASDAQ:SSRM), and GoHealth, Inc. (NASDAQ:GOCO). This group of stocks' market values resemble PSTG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KNSL,16,47309,2 HLI,14,116876,-10 TFSL,9,119038,-2 INOV,20,112024,7 HR,18,166333,-4 SSRM,18,306021,0 GOCO,17,633764,17 Average,16,214481,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $224 million in PSTG's case. Inovalon Holdings Inc (NASDAQ:INOV) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Pure Storage, Inc. (NYSE:PSTG) is more popular among hedge funds. Our overall hedge fund sentiment score for PSTG is 66.9. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on PSTG as the stock returned 40.4% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.