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Proofpoint Inc (PFPT): Hedge Funds Are Snapping Up

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Proofpoint Inc (NASDAQ:PFPT) based on that data and determine whether they were really smart about the stock.

Is Proofpoint Inc (NASDAQ:PFPT) a first-rate investment right now? The smart money was becoming more confident. The number of bullish hedge fund bets increased by 8 in recent months. Proofpoint Inc (NASDAQ:PFPT) was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 45. Our calculations also showed that PFPT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 27 hedge funds in our database with PFPT holdings at the end of March.

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

If you’d ask most traders, hedge funds are perceived as worthless, outdated financial tools of years past. While there are greater than 8000 funds in operation at the moment, We look at the top tier of this group, approximately 850 funds. These money managers direct the majority of all hedge funds’ total asset base, and by watching their top picks, Insider Monkey has spotted many investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind let’s check out the new hedge fund action encompassing Proofpoint Inc (NASDAQ:PFPT).

What have hedge funds been doing with Proofpoint Inc (NASDAQ:PFPT)?

At second quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PFPT over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Is PFPT A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Anand Parekh’s Alyeska Investment Group has the biggest position in Proofpoint Inc (NASDAQ:PFPT), worth close to $122.6 million, amounting to 1.9% of its total 13F portfolio. The second largest stake is held by RGM Capital, led by Robert G. Moses, holding a $108.7 million position; 6.5% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish consist of Ken Griffin’s Citadel Investment Group,  Renaissance Technologies and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position RGM Capital allocated the biggest weight to Proofpoint Inc (NASDAQ:PFPT), around 6.54% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, setting aside 2.81 percent of its 13F equity portfolio to PFPT.

As one would reasonably expect, some big names have jumped into Proofpoint Inc (NASDAQ:PFPT) headfirst. Praesidium Investment Management Company, managed by Kevin Oram and Peter Uddo, created the most outsized position in Proofpoint Inc (NASDAQ:PFPT). Praesidium Investment Management Company had $21.5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $13.4 million investment in the stock during the quarter. The other funds with brand new PFPT positions are Steve Cohen’s Point72 Asset Management, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Parvinder Thiara’s Athanor Capital.

Let’s now take a look at 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 Gentex Corporation (NASDAQ:GNTX), Pentair plc (NYSE:PNR), Bruker Corporation (NASDAQ:BRKR), TIM Participacoes SA (NYSE:TSU), Anaplan, Inc. (NYSE:PLAN), MKS Instruments, Inc. (NASDAQ:MKSI), and PRA Health Sciences Inc (NASDAQ:PRAH). This group of stocks’ market valuations match PFPT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNTX 38 555022 1
PNR 34 528040 5
BRKR 28 188530 7
TSU 15 173822 4
PLAN 49 2181797 -2
MKSI 32 329943 5
PRAH 33 169611 4
Average 32.7 589538 3.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.7 hedge funds with bullish positions and the average amount invested in these stocks was $590 million. That figure was $488 million in PFPT’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand TIM Participacoes SA (NYSE:TSU) is the least popular one with only 15 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 62.7. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately PFPT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PFPT were disappointed as the stock returned -1.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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