Is Patrick Industries, Inc. (PATK) A Good Stock To Buy According To Hedge Funds?

The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Patrick Industries, Inc. (NASDAQ:PATK) from the perspective of those successful funds.

Among the funds in the Insider Monkey database, Patrick Industries, Inc. (NASDAQ:PATK) was included in the equity portfolios of 17 funds at the end of September. The company registered a decline in popularity during the third quarter. At the end of this article we will also compare PATK to other stocks including Fortress Transprtn and Infr Investrs LLC (NYSE:FTAI), P.H. Glatfelter Company (NYSE:GLT), and Smart & Final Stores Inc (NYSE:SFS) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, let’s view the latest action regarding Patrick Industries, Inc. (NASDAQ:PATK).

How have hedgies been trading Patrick Industries, Inc. (NASDAQ:PATK)?

Heading into the fourth quarter of 2016, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by two funds from the end of June. Below, you can check out the change in hedge fund sentiment towards PATK over the last five quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jeffrey Gendell’s Tontine Asset Management holds the most valuable position in Patrick Industries, Inc. (NASDAQ:PATK) which has a $65.4 million position in the stock, comprising 9.7% of its 13F portfolio. The second most bullish fund manager is Richard Driehaus’ Driehaus Capital holding a $10.3 million position. Some other members of the smart money with similar optimism comprise Parsa Kiai’s Steamboat Capital Partners, Robert B. Gillam’s McKinley Capital Management, and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that dropped their entire stakes in the stock during the third quarter. Interestingly, Brandon Osten’s Venator Capital Management dropped the biggest stake of the 700 funds monitored by Insider Monkey, worth about $5.5 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also dropped its stock, about $2.8 million worth.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Patrick Industries, Inc. (NASDAQ:PATK) but similarly valued. These stocks are Fortress Transprtn and Infr Investrs LLC (NYSE:FTAI), P.H. Glatfelter Company (NYSE:GLT), Smart & Final Stores Inc (NYSE:SFS), and MiMedx Group Inc (NASDAQ:MDXG). All of these stocks’ market caps resemble PATK’s market cap.

As you can see these stocks had an average of eight funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $111 million in PATK’s case. P.H. Glatfelter Company (NYSE:GLT) is the most popular stock in this table. On the other hand Fortress Transprtn and Infr Investrs LLC (NYSE:FTAI) is the least popular one with only five funds holding shares. Compared to these stocks Patrick Industries, Inc. (NASDAQ:PATK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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