Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Proofpoint Inc (NASDAQ:PFPT).
Proofpoint Inc (NASDAQ:PFPT) investors should be aware of a decrease in activity from the world’s largest hedge funds of late. Proofpoint Inc (NASDAQ:PFPT) was in 22 hedge funds’ portfolios at the end of March. The all time high for this statistic is 45. Our calculations also showed that PFPT isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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 peek at the new hedge fund action regarding Proofpoint Inc (NASDAQ:PFPT).
Do Hedge Funds Think PFPT Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PFPT over the last 23 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in Proofpoint Inc (NASDAQ:PFPT) was held by RGM Capital, which reported holding $176.6 million worth of stock at the end of December. It was followed by Tremblant Capital with a $95.8 million position. Other investors bullish on the company included Alyeska Investment Group, Arrowstreet Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position RGM Capital allocated the biggest weight to Proofpoint Inc (NASDAQ:PFPT), around 7.73% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, setting aside 2.78 percent of its 13F equity portfolio to PFPT.
Judging by the fact that Proofpoint Inc (NASDAQ:PFPT) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds that slashed their positions entirely last quarter. Interestingly, Panayotis Takis Sparaggis’s Alkeon Capital Management cut the biggest stake of all the hedgies tracked by Insider Monkey, valued at close to $16.6 million in stock, and Xiuping Li’s Opti Capital Management was right behind this move, as the fund dumped about $3.9 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Proofpoint Inc (NASDAQ:PFPT) but similarly valued. These stocks are OneMain Holdings Inc (NYSE:OMF), Mobile TeleSystems Public Joint Stock Company (NYSE:MBT), Bumble Inc. (NASDAQ:BMBL), Digital Turbine Inc (NASDAQ:APPS), Freshpet Inc (NASDAQ:FRPT), Marriott Vacations Worldwide Corporation (NYSE:VAC), and II-VI, Inc. (NASDAQ:IIVI). This group of stocks’ market caps resemble PFPT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $451 million. That figure was $455 million in PFPT’s case. OneMain Holdings Inc (NYSE:OMF) is the most popular stock in this table. On the other hand Mobile TeleSystems Public Joint Stock Company (NYSE:MBT) is the least popular one with only 11 bullish hedge fund positions. Proofpoint Inc (NASDAQ:PFPT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PFPT is 32.9. 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 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on PFPT as the stock returned 38.4% since the end of the first quarter (through 7/16) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.