Hedge Funds Are Getting Very Bullish On PagerDuty, Inc. (PD)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of PagerDuty, Inc. (NYSE:PD) based on that data and determine whether they were really smart about the stock.

PagerDuty, Inc. (NYSE:PD) has experienced an increase in hedge fund sentiment in recent months. PagerDuty, Inc. (NYSE:PD) was in 30 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 25 hedge funds in our database with PD holdings at the end of March. Our calculations also showed that PD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most market participants, hedge funds are perceived as underperforming, outdated investment tools of years past. While there are more than 8000 funds trading today, Our researchers hone in on the leaders of this group, around 850 funds. Most estimates calculate that this group of people handle bulk of the hedge fund industry’s total asset base, and by keeping an eye on their best stock picks, Insider Monkey has discovered various investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

David Atterbury - Whetstone Capital

David Atterbury of Whetstone Capital Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 take a look at the fresh hedge fund action regarding PagerDuty, Inc. (NYSE:PD).

What does smart money think about PagerDuty, Inc. (NYSE:PD)?

At Q2’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PD over the last 20 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

The largest stake in PagerDuty, Inc. (NYSE:PD) was held by Renaissance Technologies, which reported holding $20.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $17.4 million position. Other investors bullish on the company included Whetstone Capital Advisors, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Whetstone Capital Advisors allocated the biggest weight to PagerDuty, Inc. (NYSE:PD), around 3.44% of its 13F portfolio. Kayak Investment Partners is also relatively very bullish on the stock, setting aside 0.85 percent of its 13F equity portfolio to PD.

As one would reasonably expect, key money managers have jumped into PagerDuty, Inc. (NYSE:PD) headfirst. D E Shaw, managed by D. E. Shaw, assembled the most valuable position in PagerDuty, Inc. (NYSE:PD). D E Shaw had $10.6 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $9.7 million position during the quarter. The other funds with brand new PD positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Highbridge Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as PagerDuty, Inc. (NYSE:PD) but similarly valued. These stocks are M.D.C. Holdings, Inc. (NYSE:MDC), The Ensign Group, Inc. (NASDAQ:ENSG), Winnebago Industries, Inc. (NYSE:WGO), Harmony Gold Mining Co. (NYSE:HMY), First Hawaiian, Inc. (NASDAQ:FHB), CNO Financial Group Inc (NYSE:CNO), and Acadia Healthcare Company Inc (NASDAQ:ACHC). This group of stocks’ market valuations are similar to PD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MDC 20 96381 6
ENSG 19 60583 1
WGO 33 365601 14
HMY 10 85944 1
FHB 21 147277 0
CNO 18 287275 3
ACHC 23 381810 -1
Average 20.6 203553 3.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $151 million in PD’s case. Winnebago Industries, Inc. (NYSE:WGO) is the most popular stock in this table. On the other hand Harmony Gold Mining Co. (NYSE:HMY) is the least popular one with only 10 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 83.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately PD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PD were disappointed as the stock returned -14.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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