Is PFPT A Good Stock To Buy According To Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Proofpoint Inc (NASDAQ:PFPT).

Is PFPT a good stock to buy? Proofpoint Inc (NASDAQ:PFPT) was in 37 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 45. PFPT shareholders have witnessed an increase in hedge fund interest of late. There were 35 hedge funds in our database with PFPT holdings at the end of June. Our calculations also showed that PFPT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

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

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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Robert Moses RGM Capital

Robert Moses of RGM Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now we’re going to analyze the latest hedge fund action regarding Proofpoint Inc (NASDAQ:PFPT).

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

At third quarter’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in PFPT over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, RGM Capital held the most valuable stake in Proofpoint Inc (NASDAQ:PFPT), which was worth $123 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $55.9 million worth of shares. Praesidium Investment Management Company, Tremblant Capital, and Alyeska Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position RGM Capital allocated the biggest weight to Proofpoint Inc (NASDAQ:PFPT), around 6.9% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, earmarking 3.44 percent of its 13F equity portfolio to PFPT.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Tremblant Capital, managed by Brett Barakett, established the biggest position in Proofpoint Inc (NASDAQ:PFPT). Tremblant Capital had $45 million invested in the company at the end of the quarter. Panayotis Takis Sparaggis’s Alkeon Capital Management also initiated a $14.9 million position during the quarter. The other funds with brand new PFPT positions are Brandon Haley’s Holocene Advisors, Jed Nussdorf’s Soapstone Capital, and Michel Massoud’s Melqart Asset Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Proofpoint Inc (NASDAQ:PFPT) but similarly valued. We will take a look at Natera Inc (NASDAQ:NTRA), Robert Half International Inc. (NYSE:RHI), Manhattan Associates, Inc. (NASDAQ:MANH), LPL Financial Holdings Inc (NASDAQ:LPLA), Huaneng Power International Inc (NYSE:HNP), Lincoln National Corporation (NYSE:LNC), and Voya Financial Inc (NYSE:VOYA). This group of stocks’ market values are closest to PFPT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NTRA 43 932118 8
RHI 29 272365 1
MANH 22 276489 7
LPLA 37 829559 -6
HNP 2 2278 0
LNC 30 410718 -4
VOYA 49 1103956 8
Average 30.3 546783 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $547 million. That figure was $489 million in PFPT’s case. Voya Financial Inc (NYSE:VOYA) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 2 bullish hedge fund positions. Proofpoint Inc (NASDAQ:PFPT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PFPT is 68.9. 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. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on PFPT as the stock returned 24.2% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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