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Hedge Funds Aren’t Done Buying Peloton Interactive, Inc. (PTON)

In this article we will check out the progression of hedge fund sentiment towards Peloton Interactive, Inc. (NASDAQ:PTON) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Peloton Interactive, Inc. (NASDAQ:PTON) an excellent stock to buy now? Hedge funds are becoming more confident. The number of long hedge fund bets rose by 6 lately. Our calculations also showed that PTON isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). PTON was in 36 hedge funds’ portfolios at the end of the first quarter of 2020. There were 30 hedge funds in our database with PTON positions at the end of the previous quarter.

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

To most stock holders, hedge funds are assumed to be worthless, outdated financial tools of yesteryear. While there are greater than 8000 funds with their doors open today, Our experts look at the elite of this group, approximately 850 funds. These money managers have their hands on the majority of the smart money’s total asset base, and by paying attention to their top investments, Insider Monkey has brought to light a number of investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Michael Stark Crosslink Capital

Michael Stark of Crosslink Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to view the recent hedge fund action surrounding Peloton Interactive, Inc. (NASDAQ:PTON).

How have hedgies been trading Peloton Interactive, Inc. (NASDAQ:PTON)?

Heading into the second quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the fourth quarter of 2019. On the other hand, there were a total of 0 hedge funds with a bullish position in PTON a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Chase Coleman’s Tiger Global Management LLC has the biggest position in Peloton Interactive, Inc. (NASDAQ:PTON), worth close to $110.3 million, comprising 0.7% of its total 13F portfolio. Sitting at the No. 2 spot is Woodson Capital Management, led by James Woodson Davis, holding a $92.9 million position; 13.2% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism encompass Philippe Laffont’s Coatue Management, George Soros’s Soros Fund Management and Ricky Sandler’s Eminence Capital. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Peloton Interactive, Inc. (NASDAQ:PTON), around 13.2% of its 13F portfolio. Engle Capital is also relatively very bullish on the stock, earmarking 9.25 percent of its 13F equity portfolio to PTON.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Tiger Global Management LLC, managed by Chase Coleman, assembled the biggest position in Peloton Interactive, Inc. (NASDAQ:PTON). Tiger Global Management LLC had $110.3 million invested in the company at the end of the quarter. Alex Sacerdote’s Whale Rock Capital Management also initiated a $51.9 million position during the quarter. The following funds were also among the new PTON investors: Christopher Lyle’s SCGE Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Seymour Sy Kaufman and Michael Stark’s Crosslink Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Peloton Interactive, Inc. (NASDAQ:PTON) but similarly valued. We will take a look at Weibo Corp (NASDAQ:WB), Huntington Ingalls Industries Inc (NYSE:HII), Logitech International SA (NASDAQ:LOGI), and Amdocs Limited (NASDAQ:DOX). All of these stocks’ market caps resemble PTON’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WB 10 182637 -1
HII 21 322441 -1
LOGI 15 186537 2
DOX 23 444185 -3
Average 17.25 283950 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $748 million in PTON’s case. Amdocs Limited (NASDAQ:DOX) is the most popular stock in this table. On the other hand Weibo Corp (NASDAQ:WB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Peloton Interactive, Inc. (NASDAQ:PTON) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on PTON as the stock returned 58.9% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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