Here is What Hedge Funds Think About PagerDuty, Inc. (PD)

In this article we will take a look at whether hedge funds think PagerDuty, Inc. (NYSE:PD) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

PagerDuty, Inc. (NYSE:PD) was in 26 hedge funds’ portfolios at the end of June. The all time high for this statistic is 30. PD investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. There were 24 hedge funds in our database with PD positions at the end of the first quarter. Our calculations also showed that PD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a look at the new hedge fund action surrounding PagerDuty, Inc. (NYSE:PD).

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

At second quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in PD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Catherine D. Wood’s ARK Investment Management has the most valuable position in PagerDuty, Inc. (NYSE:PD), worth close to $365.9 million, corresponding to 0.7% of its total 13F portfolio. On ARK Investment Management’s heels is Robert G. Moses of RGM Capital, with a $62 million position; 2.9% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism consist of Jacob Mitchell’s Antipodes Partners, John Overdeck and David Siegel’s Two Sigma Advisors and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position RGM Capital allocated the biggest weight to PagerDuty, Inc. (NYSE:PD), around 2.87% of its 13F portfolio. Diker Management is also relatively very bullish on the stock, setting aside 2.33 percent of its 13F equity portfolio to PD.

Consequently, specific money managers were leading the bulls’ herd. Antipodes Partners, managed by Jacob Mitchell, established the most valuable position in PagerDuty, Inc. (NYSE:PD). Antipodes Partners had $35.8 million invested in the company at the end of the quarter. Mark N. Diker’s Diker Management also made a $5.3 million investment in the stock during the quarter. The other funds with brand new PD positions are Sahm Adrangi’s Kerrisdale Capital, Karim Abbadi and Edward McBride’s Centiva Capital, and Qing Li’s Sciencast Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PagerDuty, Inc. (NYSE:PD) but similarly valued. We will take a look at Meritage Homes Corp (NYSE:MTH), Diodes Incorporated (NASDAQ:DIOD), M.D.C. Holdings, Inc. (NYSE:MDC), ExlService Holdings, Inc. (NASDAQ:EXLS), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Hilton Grand Vacations Inc. (NYSE:HGV), and AdaptHealth Corp. (NASDAQ:AHCO). All of these stocks’ market caps are closest to PD’s market cap.

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As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $328 million. That figure was $657 million in PD’s case. Hilton Grand Vacations Inc. (NYSE:HGV) is the most popular stock in this table. On the other hand ExlService Holdings, Inc. (NASDAQ:EXLS) is the least popular one with only 15 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 61.9. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 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 -3% since the end of June (through 10/15) 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.