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Were Hedge Funds Right About Palantir Technologies Inc. (PLTR)?

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·6 min read
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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 30th. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Palantir Technologies Inc. (NYSE:PLTR).

Is Palantir Technologies Inc. (NYSE:PLTR) worth your attention right now? The best stock pickers were taking a pessimistic view. The number of bullish hedge fund positions decreased by 6 recently. Palantir Technologies Inc. (NYSE:PLTR) was in 26 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that PLTR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet
Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to take a look at the key hedge fund action surrounding Palantir Technologies Inc. (NYSE:PLTR).

Do Hedge Funds Think PLTR Is A Good Stock To Buy Now?

At the end of June, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in PLTR a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Is PLTR A Good Stock To Buy?
Is PLTR A Good Stock To Buy?

The largest stake in Palantir Technologies Inc. (NYSE:PLTR) was held by ARK Investment Management, which reported holding $808.8 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $157.9 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and Duquesne Capital. In terms of the portfolio weights assigned to each position Andar Capital allocated the biggest weight to Palantir Technologies Inc. (NYSE:PLTR), around 7.86% of its 13F portfolio. Crestwood Capital Management is also relatively very bullish on the stock, dishing out 6.79 percent of its 13F equity portfolio to PLTR.

Due to the fact that Palantir Technologies Inc. (NYSE:PLTR) has experienced bearish sentiment from the smart money, it's easy to see that there was a specific group of hedge funds that decided to sell off their full holdings in the second quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, comprising about $81.6 million in stock. Jonathan Soros's fund, JS Capital, also dumped its stock, about $21.8 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 6 funds in the second quarter.

Let's now take a look at hedge fund activity in other stocks similar to Palantir Technologies Inc. (NYSE:PLTR). These stocks are Lululemon Athletica inc. (NASDAQ:LULU), Thomson Reuters Corporation (NYSE:TRI), Johnson Controls International plc (NYSE:JCI), EOG Resources Inc (NYSE:EOG), TC Energy Corporation (NYSE:TRP), Align Technology, Inc. (NASDAQ:ALGN), and Monster Beverage Corp (NASDAQ:MNST). All of these stocks' market caps are closest to PLTR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LULU,46,952983,5 TRI,27,354844,-1 JCI,39,1270005,-2 EOG,35,411137,5 TRP,22,118166,-3 ALGN,57,2689837,8 MNST,46,2310929,1 Average,38.9,1158272,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.9 hedge funds with bullish positions and the average amount invested in these stocks was $1158 million. That figure was $1361 million in PLTR's case. Align Technology, Inc. (NASDAQ:ALGN) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 22 bullish hedge fund positions. Palantir Technologies Inc. (NYSE:PLTR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PLTR is 25.2. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately PLTR wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PLTR investors were disappointed as the stock returned -1.4% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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