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Did Hedge Funds Make The Right Call On MongoDB, Inc. (MDB)?

Asma UL Husna

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards MongoDB, Inc. (NASDAQ:MDB) at the end of the first quarter and determine whether the smart money was really smart about this stock.

MongoDB, Inc. (NASDAQ:MDB) has experienced a decrease in support from the world's most elite money managers recently. Our calculations also showed that MDB isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors use to value stocks. A duo of the less known tools are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can trounce the broader indices by a significant margin (see the details here).

[caption id="attachment_792409" align="aligncenter" width="392"] Brad Gerstner of Altimeter Capital[/caption]

Brad Gerstner Altimeter Capital
Brad Gerstner Altimeter Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind let's take a look at the recent hedge fund action regarding MongoDB, Inc. (NASDAQ:MDB).

What have hedge funds been doing with MongoDB, Inc. (NASDAQ:MDB)?

At Q1's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MDB over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Tiger Global Management LLC held the most valuable stake in MongoDB, Inc. (NASDAQ:MDB), which was worth $261 million at the end of the third quarter. On the second spot was Whale Rock Capital Management which amassed $161.3 million worth of shares. SQN Investors, Citadel Investment Group, and Altimeter Capital 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 SQN Investors allocated the biggest weight to MongoDB, Inc. (NASDAQ:MDB), around 11.51% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, dishing out 8.12 percent of its 13F equity portfolio to MDB.

Due to the fact that MongoDB, Inc. (NASDAQ:MDB) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few money managers that decided to sell off their positions entirely by the end of the first quarter. At the top of the heap, Steve Cohen's Point72 Asset Management dumped the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $56.9 million in stock, and Bernard Selz's Selz Capital was right behind this move, as the fund sold off about $6.2 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds by the end of the first quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as MongoDB, Inc. (NASDAQ:MDB) but similarly valued. These stocks are United Airlines Holdings Inc (NASDAQ:UAL), VICI Properties Inc. (NYSE:VICI), SVB Financial Group (NASDAQ:SIVB), and Vistra Energy Corp. (NYSE:VST). This group of stocks' market caps are closest to MDB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UAL,41,1908897,-21 VICI,36,921752,-1 SIVB,30,383904,-5 VST,39,1440172,-10 Average,36.5,1163681,-9.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $1164 million. That figure was $770 million in MDB's case. United Airlines Holdings Inc (NASDAQ:UAL) is the most popular stock in this table. On the other hand SVB Financial Group (NASDAQ:SIVB) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks MongoDB, Inc. (NASDAQ:MDB) is even less popular than SIVB. Hedge funds clearly dropped the ball on MDB as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on MDB as the stock returned 65.8% in the second quarter and outperformed the market by an even larger margin.

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

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