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Is Patterson Companies, Inc. (PDCO) A Good Stock To Buy?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. In the financial world there are many formulas market participants employ to analyze publicly traded companies. Two of the most underrated formulas are hedge fund and insider trading sentiment. we have shown that, historically, those who follow the top picks of the best investment managers can trounce the broader indices by a significant margin (see the details here). At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Patterson Companies, Inc. (NASDAQ:PDCO), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Patterson Companies, Inc. (NASDAQ:PDCO) investors should be aware of a decrease in hedge fund interest in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as BOK Financial Corporation (NASDAQ:BOKF), White Mountains Insurance Group Ltd (NYSE:WTM), and NewMarket Corporation (NYSE:NEU) to gather more data points.

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Keeping this in mind, we’re going to take a peek at the fresh action encompassing Patterson Companies, Inc. (NASDAQ:PDCO).

What does the smart money think about Patterson Companies, Inc. (NASDAQ:PDCO)?

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 22% from the second quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Highland Capital Management, managed by James Dondero, holds the number one position in Patterson Companies, Inc. (NASDAQ:PDCO). Highland Capital Management has a $87.9 million position in the stock, comprising 2.6% of its 13F portfolio. The second most bullish fund manager is Mario Gabelli of GAMCO Investors, with a $73.5 million position; 0.5% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish comprise Justin John Ferayorni’s Tamarack Capital Management, David Harding’s Winton Capital Management and Ken Griffin’s Citadel Investment Group.

Since Patterson Companies, Inc. (NASDAQ:PDCO) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there were a few hedgies that elected to cut their full holdings heading into Q4. Interestingly, Thomas Steyer’s fund, Farallon Capital, dropped its stock, about $32.2 million worth. Ray Carroll’s Breton Hill Capital also cut its full position in the third quarter. These bearish behaviors are important to note, as total hedge fund interest fell by 8 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Patterson Companies, Inc. (NASDAQ:PDCO) but similarly valued. We will take a look at BOK Financial Corporation (NASDAQ:BOKF), White Mountains Insurance Group Ltd (NYSE:WTM), NewMarket Corporation (NYSE:NEU), and Tempur-Pedic International Inc. (NYSE:TPX). All of these stocks’ market caps are closest to Patterson Companies, Inc. (NASDAQ:PDCO)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BOKF 10 97959 -1
WTM 16 245761 2
NEU 14 78339 0
TPX 34 1212492 7

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $409 million. That figure was $411 million in Patterson Companies, Inc. (NASDAQ:PDCO)’s case. Tempur-Pedic International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand, BOK Financial Corporation (NASDAQ:BOKF) is the least popular one with only 10 bullish hedge fund positions. Patterson Companies, Inc. (NASDAQ:PDCO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Tempur-Pedic International Inc. (NYSE:TPX) might be a better candidate to consider a long position.

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