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How Did Hedge Funds’ Chegg Inc (CHGG) Bets Fare?

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The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Chegg Inc (NYSE:CHGG) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Is Chegg Inc (NYSE:CHGG) a sound investment today? The best stock pickers were getting more optimistic. The number of long hedge fund positions went up by 1 in recent months. Chegg Inc (NYSE:CHGG) was in 39 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that CHGG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 38 hedge funds in our database with CHGG positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we're going to go over the fresh hedge fund action surrounding Chegg Inc (NYSE:CHGG).

Billionaire Ken Griffin's Top 10 Stocks Holdings
Billionaire Ken Griffin's Top 10 Stocks Holdings

Ken Griffin of Citadel Investment Group

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

At the end of the third quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. By comparison, 42 hedge funds held shares or bullish call options in CHGG a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Chegg Inc (NYSE:CHGG) was held by Zevenbergen Capital Investments, which reported holding $80.7 million worth of stock at the end of September. It was followed by Sylebra Capital Management with a $77.8 million position. Other investors bullish on the company included Polar Capital, Citadel Investment Group, and Polar Capital. In terms of the portfolio weights assigned to each position Selkirk Management allocated the biggest weight to Chegg Inc (NYSE:CHGG), around 8.31% of its 13F portfolio. Stony Point Capital is also relatively very bullish on the stock, designating 5.63 percent of its 13F equity portfolio to CHGG.

Consequently, key hedge funds were leading the bulls' herd. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, created the largest position in Chegg Inc (NYSE:CHGG). Polar Capital had $31.2 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also initiated a $4.4 million position during the quarter. The other funds with brand new CHGG positions are Jinghua Yan's TwinBeech Capital, Mika Toikka's AlphaCrest Capital Management, and Qing Li's Sciencast Management.

Let's also examine hedge fund activity in other stocks similar to Chegg Inc (NYSE:CHGG). We will take a look at Hubbell Incorporated (NYSE:HUBB), Wynn Resorts, Limited (NASDAQ:WYNN), CubeSmart (NYSE:CUBE), Penumbra Inc (NYSE:PEN), A. O. Smith Corporation (NYSE:AOS), Manhattan Associates, Inc. (NASDAQ:MANH), and McAfee Corp. (NASDAQ:MCFE). All of these stocks' market caps match CHGG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HUBB,18,571249,3 WYNN,32,282672,-5 CUBE,22,225467,4 PEN,33,553799,3 AOS,29,564878,3 MANH,25,475224,-3 MCFE,31,330697,13 Average,27.1,429141,2.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $429 million. That figure was $514 million in CHGG's case. Penumbra Inc (NYSE:PEN) is the most popular stock in this table. On the other hand Hubbell Incorporated (NYSE:HUBB) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Chegg Inc (NYSE:CHGG) is more popular among hedge funds. Our overall hedge fund sentiment score for CHGG is 82. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, CHGG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CHGG were disappointed as the stock returned -61.1% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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