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How Did Atlassian Corporation Plc (TEAM) Compare Against Hedge Fund Darlings in 2019?

Reymerlyn Martin

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Atlassian Corporation Plc (NASDAQ:TEAM).

Is Atlassian Corporation Plc (NASDAQ:TEAM) a buy here? Hedge funds are getting more optimistic. The number of long hedge fund bets rose by 10 lately. Our calculations also showed that TEAM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). TEAM was in 46 hedge funds' portfolios at the end of the third quarter of 2019. There were 36 hedge funds in our database with TEAM holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_26340" align="aligncenter" width="594"] Ken Griffin of Citadel Investment Group[/caption]

CITADEL INVESTMENT GROUP

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to analyze the key hedge fund action encompassing Atlassian Corporation Plc (NASDAQ:TEAM).

How are hedge funds trading Atlassian Corporation Plc (NASDAQ:TEAM)?

At Q3's end, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TEAM over the last 17 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.

Among these funds, Renaissance Technologies held the most valuable stake in Atlassian Corporation Plc (NASDAQ:TEAM), which was worth $683.9 million at the end of the third quarter. On the second spot was Lone Pine Capital which amassed $261.1 million worth of shares. Citadel Investment Group, Tybourne Capital Management, and D E Shaw 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 Strategy Capital allocated the biggest weight to Atlassian Corporation Plc (NASDAQ:TEAM), around 16.69% of its 13F portfolio. Center Lake Capital is also relatively very bullish on the stock, dishing out 7.92 percent of its 13F equity portfolio to TEAM.

As industrywide interest jumped, some big names were breaking ground themselves. Melvin Capital Management, managed by Gabriel Plotkin, initiated the largest position in Atlassian Corporation Plc (NASDAQ:TEAM). Melvin Capital Management had $40.8 million invested in the company at the end of the quarter. Michel Massoud's Melqart Asset Management also made a $13.4 million investment in the stock during the quarter. The other funds with brand new TEAM positions are Louis Bacon's Moore Global Investments, Gregg Moskowitz's Interval Partners, and Matthew Hulsizer's PEAK6 Capital Management.

Let's check out hedge fund activity in other stocks similar to Atlassian Corporation Plc (NASDAQ:TEAM). These stocks are AvalonBay Communities Inc (NYSE:AVB), WEC Energy Group, Inc. (NYSE:WEC), LyondellBasell Industries NV (NYSE:LYB), and Carnival Corporation & Plc (NYSE:CUK). This group of stocks' market values are closest to TEAM's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVB,19,537344,-2 WEC,19,383786,6 LYB,31,502464,-14 CUK,11,142543,1 Average,20,391534,-2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $392 million. That figure was $2413 million in TEAM's case. LyondellBasell Industries NV (NYSE:LYB) is the most popular stock in this table. On the other hand Carnival Corporation & Plc (NYSE:CUK) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Atlassian Corporation Plc (NASDAQ:TEAM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on TEAM, though not to the same extent, as the stock returned 35.7% during the same period and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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