Were Hedge Funds Right About Piling Into Palo Alto Networks Inc (PANW)?

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 fourth 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 6 years and analyze what the smart money thinks of Palo Alto Networks Inc (NYSE:PANW) based on that data.

Palo Alto Networks Inc (NYSE:PANW) was in 64 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 61. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. PANW shareholders have witnessed an increase in support from the world’s most elite money managers recently. There were 61 hedge funds in our database with PANW positions at the end of the fourth quarter. Our calculations also showed that PANW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the 21st century investor’s toolkit there are tons of methods investors have at their disposal to appraise their holdings. A duo of the less known methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top money managers can outpace the market by a healthy margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a gander at the new hedge fund action encompassing Palo Alto Networks Inc (NYSE:PANW).

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

Heading into the second quarter of 2021, a total of 64 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the fourth quarter of 2020. On the other hand, there were a total of 47 hedge funds with a bullish position in PANW a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

More specifically, Viking Global was the largest shareholder of Palo Alto Networks Inc (NYSE:PANW), with a stake worth $807.8 million reported as of the end of March. Trailing Viking Global was Generation Investment Management, which amassed a stake valued at $719 million. Renaissance Technologies, Citadel Investment Group, and Cadian 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 Isomer Partners allocated the biggest weight to Palo Alto Networks Inc (NYSE:PANW), around 12.08% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, designating 9.77 percent of its 13F equity portfolio to PANW.

As one would reasonably expect, key hedge funds have been driving this bullishness. Point State Capital, managed by Zach Schreiber, assembled the biggest position in Palo Alto Networks Inc (NYSE:PANW). Point State Capital had $27 million invested in the company at the end of the quarter. Tor Minesuk’s Mondrian Capital also made a $8.1 million investment in the stock during the quarter. The following funds were also among the new PANW investors: Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, Parvinder Thiara’s Athanor Capital, and Jinghua Yan’s TwinBeech Capital.

Let’s now review hedge fund activity in other stocks similar to Palo Alto Networks Inc (NYSE:PANW). We will take a look at V.F. Corporation (NYSE:VFC), NatWest Group plc (NYSE:NWG), McKesson Corporation (NYSE:MCK), AutoZone, Inc. (NYSE:AZO), The Trade Desk, Inc. (NASDAQ:TTD), Rockwell Automation Inc. (NYSE:ROK), and Delta Air Lines, Inc. (NYSE:DAL). This group of stocks’ market valuations are similar to PANW’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.3 hedge funds with bullish positions and the average amount invested in these stocks was $907 million. That figure was $4015 million in PANW’s case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand NatWest Group plc (NYSE:NWG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Palo Alto Networks Inc (NYSE:PANW) is more popular among hedge funds. Our overall hedge fund sentiment score for PANW is 88. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.8% in 2021 through August 6th and still managed to beat the market by 6.7 percentage points. Hedge funds were also right about betting on PANW, though not to the same extent, as the stock returned 20% since the end of March (through August 6th) and outperformed the market as well.

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