We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 Penumbra Inc (NYSE:PEN).
Is Penumbra Inc (NYSE:PEN) a cheap investment today? Hedge funds are becoming hopeful. The number of long hedge fund bets inched up by 5 in recent months. Our calculations also showed that PEN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). PEN was in 30 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 25 hedge funds in our database with PEN positions at the end of the previous quarter.
In the financial world there are a large number of gauges stock market investors use to grade their stock investments. Two of the less utilized gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the S&P 500 by a very impressive margin (see the details here).
Kris Jenner of Rock Springs Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the new hedge fund action encompassing Penumbra Inc (NYSE:PEN).
What have hedge funds been doing with Penumbra Inc (NYSE:PEN)?
Heading into the first quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PEN over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in Penumbra Inc (NYSE:PEN) was held by Partner Fund Management, which reported holding $68.8 million worth of stock at the end of September. It was followed by Generation Investment Management with a $67.7 million position. Other investors bullish on the company included Rock Springs Capital Management, Adage Capital Management, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Partner Fund Management allocated the biggest weight to Penumbra Inc (NYSE:PEN), around 3.28% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, designating 1.26 percent of its 13F equity portfolio to PEN.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Generation Investment Management, managed by David Blood and Al Gore, assembled the largest position in Penumbra Inc (NYSE:PEN). Generation Investment Management had $67.7 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new PEN investors: Mika Toikka’s AlphaCrest Capital Management, Mike Vranos’s Ellington, and Qing Li’s Sciencast Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Penumbra Inc (NYSE:PEN) but similarly valued. These stocks are WPX Energy Inc (NYSE:WPX), Manpowergroup Inc (NYSE:MAN), First Citizens BancShares Inc. (NASDAQ:FCNCA), and KT Corporation (NYSE:KT). All of these stocks’ market caps match PEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WPX | 44 | 746371 | -3 |
| MAN | 27 | 476316 | 7 |
| FCNCA | 23 | 200352 | 5 |
| KT | 17 | 259132 | -5 |
| Average | 27.75 | 420543 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $421 million. That figure was $308 million in PEN’s case. WPX Energy Inc (NYSE:WPX) is the most popular stock in this table. On the other hand KT Corporation (NYSE:KT) is the least popular one with only 17 bullish hedge fund positions. Penumbra Inc (NYSE:PEN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. Hedge funds were also right about betting on PEN as the stock returned -10.5% during the first quarter (through March 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
