The market has been volatile as the Federal Reserve continues its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points through November 16th. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds' movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Cornerstone OnDemand, Inc. (NASDAQ:CSOD) and find out how it is affected by hedge funds' moves.
Cornerstone OnDemand, Inc. (NASDAQ:CSOD) shareholders have witnessed an increase in hedge fund interest recently. Our calculations also showed that CSOD isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to the beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's view the recent hedge fund action regarding Cornerstone OnDemand, Inc. (NASDAQ:CSOD).
How have hedgies been trading Cornerstone OnDemand, Inc. (NASDAQ:CSOD)?
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the second quarter of 2018. By comparison, 20 hedge funds held shares or bullish call options in CSOD heading into this year. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Praesidium Investment Management Company held the most valuable stake in Cornerstone OnDemand, Inc. (NASDAQ:CSOD), which was worth $181.9 million at the end of the third quarter. On the second spot was Eminence Capital which amassed $145.1 million worth of shares. Moreover, RGM Capital, Citadel Investment Group, and Tensile Capital were also bullish on Cornerstone OnDemand, Inc. (NASDAQ:CSOD), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, some big names have been driving this bullishness. Garelick Capital Partners, managed by Bruce Garelick, created the biggest position in Cornerstone OnDemand, Inc. (NASDAQ:CSOD). Garelick Capital Partners had $15 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny's Balyasny Asset Management and Frank Slattery's Symmetry Peak Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cornerstone OnDemand, Inc. (NASDAQ:CSOD) but similarly valued. These stocks are McDermott International, Inc. (NYSE:MDR), Nuveen AMT-Free Quality Municipal Income Fund (NYSE:NEA), RPC, Inc. (NYSE:RES), and Avista Corp (NYSE:AVA). This group of stocks' market caps resemble CSOD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDR,24,322643,2 NEA,3,7428,-1 RES,15,153824,-4 AVA,17,481402,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $241 million. That figure was $785 million in CSOD's case. McDermott International, Inc. (NYSE:MDR) is the most popular stock in this table. On the other hand Nuveen AMT-Free Quality Municipal Income Fund (NYSE:NEA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.