Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Penumbra Inc (NYSE:PEN) investors should pay attention to an increase in hedge fund interest recently. PEN was in 20 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with PEN holdings at the end of the previous quarter. Our calculations also showed that PEN isn’t among the 30 most popular stocks among hedge funds.
If you’d ask most market participants, hedge funds are viewed as slow, outdated investment vehicles of the past. While there are over 8000 funds in operation today, We hone in on the crème de la crème of this club, around 750 funds. These investment experts manage the majority of all hedge funds’ total asset base, and by watching their highest performing picks, Insider Monkey has unsheathed several investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Let’s view the key hedge fund action surrounding Penumbra Inc (NYSE:PEN).
How have hedgies been trading Penumbra Inc (NYSE:PEN)?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PEN over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Partner Fund Management held the most valuable stake in Penumbra Inc (NYSE:PEN), which was worth $106.9 million at the end of the first quarter. On the second spot was Redmile Group which amassed $47.5 million worth of shares. Moreover, Rock Springs Capital Management, D E Shaw, and Millennium Management were also bullish on Penumbra Inc (NYSE:PEN), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. PEAK6 Capital Management, managed by Matthew Hulsizer, initiated the biggest call position in Penumbra Inc (NYSE:PEN). PEAK6 Capital Management had $3.9 million invested in the company at the end of the quarter. Brad Farber’s Atika Capital also made a $3.5 million investment in the stock during the quarter. The following funds were also among the new PEN investors: Benjamin A. Smith’s Laurion Capital Management, Steve Cohen’s Point72 Asset Management, and Michael Gelband’s ExodusPoint Capital.
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 Murphy Oil Corporation (NYSE:MUR), MDU Resources Group Inc (NYSE:MDU), JBG SMITH Properties (NYSE:JBGS), and ITT Inc. (NYSE:ITT). All of these stocks’ market caps resemble PEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MUR | 20 | 324847 | 2 |
| MDU | 18 | 189257 | -6 |
| JBGS | 17 | 312625 | -3 |
| ITT | 22 | 395262 | -3 |
| Average | 19.25 | 305498 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $305 million. That figure was $254 million in PEN’s case. ITT Inc. (NYSE:ITT) is the most popular stock in this table. On the other hand JBG SMITH Properties (NYSE:JBGS) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on PEN, though not to the same extent, as the stock returned -0.5% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
