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Hedge Funds Are Cashing Out Of Cyberark Software Ltd (CYBR)

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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Cyberark Software Ltd (NASDAQ:CYBR).

Is Cyberark Software Ltd (NASDAQ:CYBR) the right investment to pursue these days? Money managers were becoming less hopeful. The number of long hedge fund bets decreased by 5 lately. Cyberark Software Ltd (NASDAQ:CYBR) was in 27 hedge funds' portfolios at the end of June. The all time high for this statistic is 32. Our calculations also showed that CYBR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Billionaire David Siegel's Top 10 Stock Picks
Billionaire David Siegel's Top 10 Stock Picks

David Siegel of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. With all of this in mind we're going to take a look at the key hedge fund action encompassing Cyberark Software Ltd (NASDAQ:CYBR).

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

At the end of June, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CYBR over the last 24 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is CYBR A Good Stock To Buy?
Is CYBR A Good Stock To Buy?

Among these funds, RGM Capital held the most valuable stake in Cyberark Software Ltd (NASDAQ:CYBR), which was worth $148.2 million at the end of the second quarter. On the second spot was Polar Capital which amassed $59.6 million worth of shares. Two Sigma Advisors, Alyeska Investment Group, and Rima Senvest 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 North Run Capital allocated the biggest weight to Cyberark Software Ltd (NASDAQ:CYBR), around 8.44% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, setting aside 6.86 percent of its 13F equity portfolio to CYBR.

Judging by the fact that Cyberark Software Ltd (NASDAQ:CYBR) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there were a few hedge funds that slashed their entire stakes by the end of the second quarter. Interestingly, Doron Breen and Mori Arkin's Sphera Global Healthcare Fund cut the biggest investment of all the hedgies watched by Insider Monkey, valued at an estimated $7.1 million in stock, and Parvinder Thiara's Athanor Capital was right behind this move, as the fund sold off about $6.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 5 funds by the end of the second quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Cyberark Software Ltd (NASDAQ:CYBR) but similarly valued. These stocks are Driven Brands Holdings Inc. (NASDAQ:DRVN), ZIM Integrated Shipping Services Ltd. (NYSE:ZIM), ChampionX Corporation (NYSE:CHX), WESCO International, Inc. (NYSE:WCC), ASGN Incorporated (NYSE:ASGN), Armstrong World Industries, Inc. (NYSE:AWI), and Reata Pharmaceuticals, Inc. (NASDAQ:RETA). This group of stocks' market caps match CYBR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DRVN,19,91484,1 ZIM,25,327039,11 CHX,30,525472,2 WCC,23,1196955,-5 ASGN,15,59880,-5 AWI,17,595141,-8 RETA,18,305350,-6 Average,21,443046,-1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $443 million. That figure was $502 million in CYBR's case. ChampionX Corporation (NYSE:CHX) is the most popular stock in this table. On the other hand ASGN Incorporated (NYSE:ASGN) is the least popular one with only 15 bullish hedge fund positions. Cyberark Software Ltd (NASDAQ:CYBR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CYBR is 65.3. 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. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on CYBR as the stock returned 39.8% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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