In this article we will analyze whether Pure Storage, Inc. (NYSE:PSTG) 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.
Pure Storage, Inc. (NYSE:PSTG) has experienced an increase in support from the world's most elite money managers in recent months. Pure Storage, Inc. (NYSE:PSTG) was in 31 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 35. There were 30 hedge funds in our database with PSTG positions at the end of the first quarter. Our calculations also showed that PSTG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
According to most market participants, hedge funds are seen as underperforming, outdated investment vehicles of years past. While there are more than 8000 funds in operation at the moment, Our researchers look at the top tier of this club, approximately 850 funds. These investment experts preside over the lion's share of the smart money's total asset base, and by tracking their finest investments, Insider Monkey has identified a number of investment strategies that have historically exceeded the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Richard S. Pzena of Pzena Investment Management
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. With all of this in mind we're going to view the new hedge fund action regarding Pure Storage, Inc. (NYSE:PSTG).
Do Hedge Funds Think PSTG Is A Good Stock To Buy Now?
At the end of June, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. On the other hand, there were a total of 29 hedge funds with a bullish position in PSTG a year ago. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Pure Storage, Inc. (NYSE:PSTG) was held by ARK Investment Management, which reported holding $297.9 million worth of stock at the end of June. It was followed by Eminence Capital with a $152.8 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Eminence Capital allocated the biggest weight to Pure Storage, Inc. (NYSE:PSTG), around 1.88% of its 13F portfolio. ARK Investment Management is also relatively very bullish on the stock, setting aside 0.55 percent of its 13F equity portfolio to PSTG.
Consequently, key hedge funds were breaking ground themselves. Woodline Partners, managed by Michael Rockefeller and KarláKroeker, initiated the most outsized position in Pure Storage, Inc. (NYSE:PSTG). Woodline Partners had $22.3 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $8.1 million position during the quarter. The following funds were also among the new PSTG investors: Jinghua Yan's TwinBeech Capital, Xiuping Li's Opti Capital Management, and Richard S. Pzena's Pzena Investment Management.
Let's also examine hedge fund activity in other stocks similar to Pure Storage, Inc. (NYSE:PSTG). These stocks are BWX Technologies Inc (NYSE:BWXT), NeoGenomics, Inc. (NASDAQ:NEO), Tripadvisor Inc (NASDAQ:TRIP), Saia Inc (NASDAQ:SAIA), Olo Inc. (NYSE:OLO), Chindata Group Holdings Limited (NASDAQ:CD), and Spirit Realty Capital Inc (NYSE:SRC). This group of stocks' market values resemble PSTG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BWXT,20,160928,4 NEO,13,108232,-2 TRIP,36,1178260,-9 SAIA,22,418195,6 OLO,14,72548,-7 CD,10,115586,1 SRC,19,258783,1 Average,19.1,330362,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $330 million. That figure was $791 million in PSTG's case. Tripadvisor Inc (NASDAQ:TRIP) is the most popular stock in this table. On the other hand Chindata Group Holdings Limited (NASDAQ:CD) is the least popular one with only 10 bullish hedge fund positions. Pure Storage, Inc. (NYSE:PSTG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PSTG is 73. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on PSTG as the stock returned 34.3% since the end of Q2 (through 10/15) 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.
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