Were Hedge Funds Right About Piling Into Peloton Interactive, Inc. (PTON)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtPeloton Interactive, Inc. (NASDAQ:PTON) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Peloton Interactive, Inc. (NASDAQ:PTON) shareholders have witnessed an increase in enthusiasm from smart money recently. PTON was in 36 hedge funds’ portfolios at the end of the first quarter of 2020. There were 30 hedge funds in our database with PTON positions at the end of the previous quarter. Our calculations also showed that PTON isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

According to most stock holders, hedge funds are assumed to be slow, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers look at the moguls of this club, approximately 850 funds. These hedge fund managers preside over the lion’s share of all hedge funds’ total asset base, and by paying attention to their inimitable picks, Insider Monkey has brought to light a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Phill Gross of Adage Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now let’s take a gander at the latest hedge fund action surrounding Peloton Interactive, Inc. (NASDAQ:PTON).

Hedge fund activity in Peloton Interactive, Inc. (NASDAQ:PTON)

At Q1’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in PTON a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PTON A Good Stock To Buy?

The largest stake in Peloton Interactive, Inc. (NASDAQ:PTON) was held by Tiger Global Management LLC, which reported holding $110.3 million worth of stock at the end of September. It was followed by Woodson Capital Management with a $92.9 million position. Other investors bullish on the company included Coatue Management, Soros Fund Management, and Eminence Capital. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Peloton Interactive, Inc. (NASDAQ:PTON), around 13.2% of its 13F portfolio. Engle Capital is also relatively very bullish on the stock, setting aside 9.25 percent of its 13F equity portfolio to PTON.

As aggregate interest increased, specific money managers have been driving this bullishness. Tiger Global Management LLC, managed by Chase Coleman, assembled the most outsized position in Peloton Interactive, Inc. (NASDAQ:PTON). Tiger Global Management LLC had $110.3 million invested in the company at the end of the quarter. Alex Sacerdote’s Whale Rock Capital Management also initiated a $51.9 million position during the quarter. The other funds with new positions in the stock are Christopher Lyle’s SCGE Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Seymour Sy Kaufman and Michael Stark’s Crosslink Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Peloton Interactive, Inc. (NASDAQ:PTON) but similarly valued. These stocks are Weibo Corp (NASDAQ:WB), Huntington Ingalls Industries Inc (NYSE:HII), Logitech International SA (NASDAQ:LOGI), and Amdocs Limited (NYSE:DOX). All of these stocks’ market caps are closest to PTON’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WB 10 182637 -1
HII 21 322441 -1
LOGI 15 186537 2
DOX 23 444185 -3
Average 17.25 283950 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $748 million in PTON’s case. Amdocs Limited (NYSE:DOX) is the most popular stock in this table. On the other hand Weibo Corp (NASDAQ:WB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Peloton Interactive, Inc. (NASDAQ:PTON) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on PTON as the stock returned 117.6% in Q2 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.