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Hedge Funds Are Cashing Out Of C3.ai, Inc. (AI)

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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about C3.ai, Inc. (NYSE:AI) in this article.

C3.ai, Inc. (NYSE:AI) investors should be aware of a decrease in support from the world's most elite money managers of late. C3.ai, Inc. (NYSE:AI) was in 27 hedge funds' portfolios at the end of March. The all time high for this statistic is 37. There were 37 hedge funds in our database with AI positions at the end of the fourth quarter. Our calculations also showed that AI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

At the moment there are a multitude of indicators shareholders employ to appraise stocks. Two of the best indicators are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can outperform the broader indices by a healthy amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Chase Coleman of Tiger Global

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we're going to take a gander at the recent hedge fund action surrounding C3.ai, Inc. (NYSE:AI).

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

Heading into the second quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the fourth quarter of 2020. By comparison, 0 hedge funds held shares or bullish call options in AI a year ago. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

The largest stake in C3.ai, Inc. (NYSE:AI) was held by Tiger Global Management LLC, which reported holding $65.9 million worth of stock at the end of December. It was followed by Coatue Management with a $58.8 million position. Other investors bullish on the company included Tudor Investment Corp, Citadel Investment Group, and Whale Rock Capital Management. In terms of the portfolio weights assigned to each position Tudor Investment Corp allocated the biggest weight to C3.ai, Inc. (NYSE:AI), around 0.99% of its 13F portfolio. Kayak Investment Partners is also relatively very bullish on the stock, dishing out 0.32 percent of its 13F equity portfolio to AI.

Because C3.ai, Inc. (NYSE:AI) has witnessed a decline in interest from hedge fund managers, logic holds that there were a few hedge funds that slashed their entire stakes last quarter. Intriguingly, Eric Bannasch's Cadian Capital cut the largest stake of the 750 funds tracked by Insider Monkey, worth about $52 million in stock, and David Goel and Paul Ferri's Matrix Capital Management was right behind this move, as the fund dropped about $41.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 10 funds last quarter.

Let's now review hedge fund activity in other stocks similar to C3.ai, Inc. (NYSE:AI). We will take a look at First Financial Bankshares Inc (NASDAQ:FFIN), Old Republic International Corporation (NYSE:ORI), Rexford Industrial Realty Inc (NYSE:REXR), Boyd Gaming Corporation (NYSE:BYD), Shift4 Payments, Inc. (NYSE:FOUR), Cameco Corporation (NYSE:CCJ), and CDK Global Inc (NASDAQ:CDK). This group of stocks' market values are closest to AI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FFIN,11,31041,-1 ORI,24,377223,-3 REXR,13,75514,-4 BYD,22,299026,-6 FOUR,33,538716,-5 CCJ,30,492804,5 CDK,18,298124,-9 Average,21.6,301778,-3.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $302 million. That figure was $222 million in AI's case. Shift4 Payments, Inc. (NYSE:FOUR) is the most popular stock in this table. On the other hand First Financial Bankshares Inc (NASDAQ:FFIN) is the least popular one with only 11 bullish hedge fund positions. C3.ai, Inc. (NYSE:AI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AI is 53.3. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately AI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AI were disappointed as the stock returned -10.2% since the end of March (through 7/9) 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 many of these stocks already outperformed the market since 2019.

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