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Is CommVault Systems, Inc. (CVLT) Going to Burn These Hedge Funds?

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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about CommVault Systems, Inc. (NASDAQ:CVLT) in this article.

CommVault Systems, Inc. (NASDAQ:CVLT) investors should be aware of an increase in hedge fund sentiment in recent months. CommVault Systems, Inc. (NASDAQ:CVLT) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistic is 33. There were 23 hedge funds in our database with CVLT positions at the end of the first quarter. Our calculations also showed that CVLT isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Peter Rathjens Arrowstreet Capital 394
Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

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 let's review the fresh hedge fund action encompassing CommVault Systems, Inc. (NASDAQ:CVLT).

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

Heading into the third quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CVLT over the last 24 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CVLT A Good Stock To Buy?
Is CVLT A Good Stock To Buy?

Among these funds, Starboard Value LP held the most valuable stake in CommVault Systems, Inc. (NASDAQ:CVLT), which was worth $318.9 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $168.9 million worth of shares. Arrowstreet Capital, D E Shaw, and Schonfeld Strategic Advisors 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 Starboard Value LP allocated the biggest weight to CommVault Systems, Inc. (NASDAQ:CVLT), around 6.26% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, setting aside 2.28 percent of its 13F equity portfolio to CVLT.

As industrywide interest jumped, key hedge funds have jumped into CommVault Systems, Inc. (NASDAQ:CVLT) headfirst. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), established the biggest position in CommVault Systems, Inc. (NASDAQ:CVLT). Schonfeld Strategic Advisors had $18.2 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also made a $10.3 million investment in the stock during the quarter. The following funds were also among the new CVLT investors: Steve Cohen's Point72 Asset Management, Matthew Hulsizer's PEAK6 Capital Management, and Qing Li's Sciencast Management.

Let's now take a look at hedge fund activity in other stocks similar to CommVault Systems, Inc. (NASDAQ:CVLT). We will take a look at GoHealth, Inc. (NASDAQ:GOCO), Mercury General Corporation (NYSE:MCY), Genius Sports Ltd (NYSE:GENI), Murphy Oil Corporation (NYSE:MUR), Murphy USA Inc. (NYSE:MUSA), Accolade, Inc. (NASDAQ:ACCD), and Onto Innovation Inc. (NYSE:ONTO). This group of stocks' market values resemble CVLT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GOCO,14,483021,-3 MCY,14,175204,-6 GENI,39,375026,39 MUR,18,143761,-2 MUSA,26,274669,7 ACCD,24,594899,5 ONTO,25,325217,7 Average,22.9,338828,6.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $693 million in CVLT's case. Genius Sports Ltd (NYSE:GENI) is the most popular stock in this table. On the other hand GoHealth, Inc. (NASDAQ:GOCO) is the least popular one with only 14 bullish hedge fund positions. CommVault Systems, Inc. (NASDAQ:CVLT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CVLT is 63.5. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately CVLT wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CVLT were disappointed as the stock returned -3.5% since the end of June (through 10/15) 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.