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Hedge Funds Are Dumping Pivotal Software, Inc. (PVTL)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Pivotal Software, Inc. (NYSE:PVTL).

Is Pivotal Software, Inc. (NYSE:PVTL) a great investment now? The smart money is taking a bearish view. The number of bullish hedge fund positions decreased by 5 lately. Our calculations also showed that PVTL isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

David Atterbury - Whetstone Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the new hedge fund action encompassing Pivotal Software, Inc. (NYSE:PVTL).

How have hedgies been trading Pivotal Software, Inc. (NYSE:PVTL)?

At Q2’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PVTL over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

PVTL_oct2019

More specifically, SQN Investors was the largest shareholder of Pivotal Software, Inc. (NYSE:PVTL), with a stake worth $44.1 million reported as of the end of March. Trailing SQN Investors was Citadel Investment Group, which amassed a stake valued at $17 million. Tiger Global Management LLC, Alyeska Investment Group, and Whetstone Capital Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Because Pivotal Software, Inc. (NYSE:PVTL) has faced falling interest from hedge fund managers, logic holds that there were a few hedge funds who were dropping their entire stakes heading into Q3. It’s worth mentioning that Robert Pitts’s Steadfast Capital Management cut the largest position of the 750 funds watched by Insider Monkey, totaling close to $97.1 million in stock, and Jacob Doft’s Highline Capital Management was right behind this move, as the fund said goodbye to about $42.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 5 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to Pivotal Software, Inc. (NYSE:PVTL). We will take a look at American Eagle Outfitters Inc. (NYSE:AEO), Domtar Corporation (NYSE:UFS), Uniqure NV (NASDAQ:QURE), and BancorpSouth Bank (NYSE:BXS). This group of stocks’ market caps are similar to PVTL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AEO 21 348672 -4
UFS 18 139587 -1
QURE 34 892256 6
BXS 12 62543 3
Average 21.25 360765 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $361 million. That figure was $169 million in PVTL’s case. Uniqure NV (NASDAQ:QURE) is the most popular stock in this table. On the other hand BancorpSouth Bank (NYSE:BXS) is the least popular one with only 12 bullish hedge fund positions. Pivotal Software, Inc. (NYSE:PVTL) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on PVTL as the stock returned 41.3% during the same time frame and outperformed the market by an even larger margin.

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

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