Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the fourth quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to CommVault Systems, Inc. (NASDAQ:CVLT) changed recently.
CommVault Systems, Inc. (NASDAQ:CVLT) investors should pay attention to an increase in hedge fund interest in recent months. Our calculations also showed that cvlt isn't among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
Let's review the key hedge fund action surrounding CommVault Systems, Inc. (NASDAQ:CVLT).
How have hedgies been trading CommVault Systems, Inc. (NASDAQ:CVLT)?
At Q4's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the second quarter of 2018. On the other hand, there were a total of 21 hedge funds with a bullish position in CVLT a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Paul Singer's Elliott Management has the biggest position in CommVault Systems, Inc. (NASDAQ:CVLT), worth close to $124.1 million, comprising 0.9% of its total 13F portfolio. Coming in second is Renaissance Technologies, led by Jim Simons, holding a $102.6 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism contain D. E. Shaw's D E Shaw, Cliff Asness's AQR Capital Management and Vikas Lunia's Lunia Capital.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Shannon River Fund Management, managed by Spencer M. Waxman, established the biggest position in CommVault Systems, Inc. (NASDAQ:CVLT). Shannon River Fund Management had $6.4 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $2.4 million investment in the stock during the quarter. The other funds with brand new CVLT positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Matthew Hulsizer's PEAK6 Capital Management, and Matthew Tewksbury's Stevens Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as CommVault Systems, Inc. (NASDAQ:CVLT) but similarly valued. We will take a look at Rexford Industrial Realty Inc (NYSE:REXR), National General Holdings Corp (NASDAQ:NGHC), Kennametal Inc. (NYSE:KMT), and NCR Corporation (NYSE:NCR). This group of stocks' market caps are similar to CVLT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position REXR,18,284812,5 NGHC,16,219095,5 KMT,21,275426,0 NCR,20,163313,3 Average,18.75,235662,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $236 million. That figure was $360 million in CVLT's case. Kennametal Inc. (NYSE:KMT) is the most popular stock in this table. On the other hand National General Holdings Corp (NASDAQ:NGHC) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks CommVault Systems, Inc. (NASDAQ:CVLT) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CVLT wasn't nearly as popular as these 15 stock and hedge funds that were betting on CVLT were disappointed as the stock returned 3.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.