Hedge Funds Are Coming Back To PagerDuty, Inc. (PD)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards PagerDuty, Inc. (NYSE:PD).

Is PagerDuty, Inc. (NYSE:PD) a great stock to buy now? Investors who are in the know were getting more bullish. The number of bullish hedge fund positions increased by 4 lately. PagerDuty, Inc. (NYSE:PD) was in 30 hedge funds’ portfolios at the end of September. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 26 hedge funds in our database with PD holdings at the end of June.

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 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. With all of this in mind we’re going to check out the key hedge fund action encompassing PagerDuty, Inc. (NYSE:PD).

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

At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PD over the last 25 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in PagerDuty, Inc. (NYSE:PD) was held by ARK Investment Management, which reported holding $414.1 million worth of stock at the end of September. It was followed by RGM Capital with a $61.6 million position. Other investors bullish on the company included Point72 Asset Management, Bares Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position RGM Capital allocated the biggest weight to PagerDuty, Inc. (NYSE:PD), around 3.02% of its 13F portfolio. Provenire Capital is also relatively very bullish on the stock, dishing out 2.81 percent of its 13F equity portfolio to PD.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in PagerDuty, Inc. (NYSE:PD). Point72 Asset Management had $50.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $20.4 million investment in the stock during the quarter. The other funds with brand new PD positions are Anand Parekh’s Alyeska Investment Group, Donald Sussman’s Paloma Partners, and Anthony S. Daffer’s Provenire Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as PagerDuty, Inc. (NYSE:PD) but similarly valued. These stocks are Allegiant Travel Company (NASDAQ:ALGT), Methanex Corporation (NASDAQ:MEOH), Matson Inc. (NYSE:MATX), Triton International Limited (NYSE:TRTN), Chimera Investment Corporation (NYSE:CIM), Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), and LGI Homes Inc (NASDAQ:LGIH). This group of stocks’ market values resemble PD’s market value.

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As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $820 million in PD’s case. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) is the most popular stock in this table. On the other hand Matson Inc. (NYSE:MATX) is the least popular one with only 13 bullish hedge fund positions. PagerDuty, Inc. (NYSE:PD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PD is 81.5. 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. This is a slightly positive signal but 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately PD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PD were disappointed as the stock returned -14.4% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.

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