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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 (Recession is Imminent: We Need A Travel Ban NOW). 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 New Relic Inc (NYSE:NEWR).
New Relic Inc (NYSE:NEWR) has experienced a decrease in enthusiasm from smart money of late. Our calculations also showed that NEWR 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.
To most traders, hedge funds are assumed to be slow, old financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open at the moment, Our researchers hone in on the top tier of this club, around 850 funds. These money managers manage most of the hedge fund industry's total asset base, and by paying attention to their first-class equity investments, Insider Monkey has figured out several investment strategies that have historically exceeded the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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Barry Rosenstein of JANA Partners[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's review the fresh hedge fund action encompassing New Relic Inc (NYSE:NEWR).
What have hedge funds been doing with New Relic Inc (NYSE:NEWR)?
At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in NEWR a year ago. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ricky Sandler's Eminence Capital has the biggest position in New Relic Inc (NYSE:NEWR), worth close to $177.2 million, accounting for 1.9% of its total 13F portfolio. The second most bullish fund manager is HMI Capital, managed by Mick Hellman, which holds a $137.7 million position; 9.1% of its 13F portfolio is allocated to the company. Some other peers that are bullish encompass David Goel and Paul Ferri's Matrix Capital Management, Chase Coleman's Tiger Global Management LLC and Barry Rosenstein's JANA Partners. In terms of the portfolio weights assigned to each position Archon Capital Management allocated the biggest weight to New Relic Inc (NYSE:NEWR), around 10.64% of its 13F portfolio. HMI Capital is also relatively very bullish on the stock, setting aside 9.14 percent of its 13F equity portfolio to NEWR.
Seeing as New Relic Inc (NYSE:NEWR) has faced declining sentiment from hedge fund managers, logic holds that there is a sect of hedge funds who sold off their entire stakes by the end of the first quarter. It's worth mentioning that Josh Resnick's Jericho Capital Asset Management cut the biggest stake of all the hedgies tracked by Insider Monkey, worth an estimated $39.1 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $32.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 13 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to New Relic Inc (NYSE:NEWR). These stocks are WD-40 Company (NASDAQ:WDFC), Livongo Health, Inc. (NASDAQ:LVGO), Cosan Limited (NYSE:CZZ), and Blackbaud, Inc. (NASDAQ:BLKB). All of these stocks' market caps resemble NEWR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WDFC,17,199539,0 LVGO,17,82549,-1 CZZ,15,141907,3 BLKB,22,107618,6 Average,17.75,132903,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $810 million in NEWR's case. Blackbaud, Inc. (NASDAQ:BLKB) is the most popular stock in this table. On the other hand Cosan Limited (NYSE:CZZ) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks New Relic Inc (NYSE:NEWR) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on NEWR as the stock returned 43.1% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.