Is Pulmonx Corporation (LUNG) A Good Stock To Buy?

·6 min read

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Pulmonx Corporation (NASDAQ:LUNG).

Is LUNG a good stock to buy? Pulmonx Corporation (NASDAQ:LUNG) has experienced a decrease in hedge fund sentiment recently. Pulmonx Corporation (NASDAQ:LUNG) was in 20 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 27. There were 27 hedge funds in our database with LUNG holdings at the end of March. Our calculations also showed that LUNG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you'd ask most stock holders, hedge funds are seen as slow, old financial tools of the past. While there are over 8000 funds trading today, Our researchers look at the top tier of this group, about 850 funds. These hedge fund managers shepherd bulk of all hedge funds' total capital, and by observing their highest performing picks, Insider Monkey has determined a number of investment strategies that have historically exceeded the broader indices. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum 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.

James Flynn Deerfield Management
James Flynn Deerfield Management

James E. Flynn of Deerfield Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy 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. Keeping this in mind we're going to take a glance at the recent hedge fund action surrounding Pulmonx Corporation (NASDAQ:LUNG).

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

At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LUNG over the last 24 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Among these funds, Deerfield Management held the most valuable stake in Pulmonx Corporation (NASDAQ:LUNG), which was worth $79.5 million at the end of the second quarter. On the second spot was Point72 Asset Management which amassed $29.2 million worth of shares. Pura Vida Investments, Rock Springs Capital Management, and Miura Global Management 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 Miura Global Management allocated the biggest weight to Pulmonx Corporation (NASDAQ:LUNG), around 4.59% of its 13F portfolio. Iron Triangle Partners is also relatively very bullish on the stock, dishing out 2.5 percent of its 13F equity portfolio to LUNG.

Because Pulmonx Corporation (NASDAQ:LUNG) has experienced declining sentiment from hedge fund managers, we can see that there exists a select few funds that elected to cut their entire stakes by the end of the second quarter. Intriguingly, Israel Englander's Millennium Management sold off the biggest stake of all the hedgies watched by Insider Monkey, worth close to $14.7 million in stock. Richard Driehaus's fund, Driehaus Capital, also cut its stock, about $11.9 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 7 funds by the end of the second quarter.

Let's now review hedge fund activity in other stocks similar to Pulmonx Corporation (NASDAQ:LUNG). We will take a look at Usa Compression Partners LP (NYSE:USAC), Delek US Holdings, Inc. (NYSE:DK), Conduent Incorporated (NASDAQ:CNDT), Ocugen, Inc. (NASDAQ:OCGN), G-III Apparel Group, Ltd. (NASDAQ:GIII), Tenneco Inc (NYSE:TEN), and Sturm, Ruger & Company, Inc. (NYSE:RGR). All of these stocks' market caps resemble LUNG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position USAC,3,6103,1 DK,16,229538,3 CNDT,23,386854,1 OCGN,10,48887,4 GIII,17,99902,3 TEN,26,219322,-2 RGR,19,168735,-2 Average,16.3,165620,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $265 million in LUNG's case. Tenneco Inc (NYSE:TEN) is the most popular stock in this table. On the other hand Usa Compression Partners LP (NYSE:USAC) is the least popular one with only 3 bullish hedge fund positions. Pulmonx Corporation (NASDAQ:LUNG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LUNG is 57.2. 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 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% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately LUNG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on LUNG were disappointed as the stock returned -10.4% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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