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

In this article we will analyze whether Purple Innovation, Inc. (NASDAQ:PRPL) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is PRPL a good stock to buy? The smart money was in a bullish mood. The number of bullish hedge fund bets improved by 8 recently. Purple Innovation, Inc. (NASDAQ:PRPL) was in 36 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PRPL 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.

Today there are numerous gauges market participants put to use to grade publicly traded companies. Two of the best gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the best money managers can beat the broader indices by a superb amount (see the details here).

Glen Kacher of Light Street 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 let’s take a look at the fresh hedge fund action encompassing Purple Innovation, Inc. (NASDAQ:PRPL).

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

At third quarter’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PRPL over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Coliseum Capital was the largest shareholder of Purple Innovation, Inc. (NASDAQ:PRPL), with a stake worth $249.3 million reported as of the end of September. Trailing Coliseum Capital was Woodson Capital Management, which amassed a stake valued at $106.9 million. Light Street Capital, Scopus Asset Management, and Kingdon Capital 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 Coliseum Capital allocated the biggest weight to Purple Innovation, Inc. (NASDAQ:PRPL), around 26.66% of its 13F portfolio. Woodson Capital Management is also relatively very bullish on the stock, earmarking 6.11 percent of its 13F equity portfolio to PRPL.

As aggregate interest increased, some big names have been driving this bullishness. Light Street Capital, managed by Glen Kacher, initiated the most valuable position in Purple Innovation, Inc. (NASDAQ:PRPL). Light Street Capital had $63.5 million invested in the company at the end of the quarter. Bart Baum’s Ionic Capital Management also made a $25.4 million investment in the stock during the quarter. The other funds with brand new PRPL positions are Israel Englander’s Millennium Management, Angela Aldrich’s Bayberry Capital Partners, and Richard Scott Greeder’s Broad Bay Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Purple Innovation, Inc. (NASDAQ:PRPL) but similarly valued. These stocks are Heron Therapeutics Inc (NASDAQ:HRTX), World Fuel Services Corporation (NYSE:INT), Compugen Ltd. (NASDAQ:CGEN), Terex Corporation (NYSE:TEX), Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), HNI Corp (NYSE:HNI), and Bloomin’ Brands Inc (NASDAQ:BLMN). This group of stocks’ market caps match PRPL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HRTX 17 274649 -4
INT 16 79951 -2
CGEN 14 76267 5
TEX 18 212256 -1
DRNA 31 183699 -4
HNI 7 31809 -3
BLMN 30 284019 7
Average 19 163236 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $724 million in PRPL’s case. Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is the most popular stock in this table. On the other hand HNI Corp (NYSE:HNI) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Purple Innovation, Inc. (NASDAQ:PRPL) is more popular among hedge funds. Our overall hedge fund sentiment score for PRPL is 90. 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 returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on PRPL as the stock returned 12.8% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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