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Hedge Funds Are Crazy About Elastic N.V. (ESTC)

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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Elastic N.V. (NYSE:ESTC).

Elastic N.V. (NYSE:ESTC) shareholders have witnessed an increase in hedge fund interest in recent months. Elastic N.V. (NYSE:ESTC) was in 59 hedge funds' portfolios at the end of September. The all time high for this statistic was previously 55. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 55 hedge funds in our database with ESTC positions at the end of the second quarter. Our calculations also showed that ESTC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Now let's analyze the new hedge fund action surrounding Elastic N.V. (NYSE:ESTC).

Alex Sacerdote of Whale Rock Capital Management

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

At the end of the third quarter, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. By comparison, 36 hedge funds held shares or bullish call options in ESTC a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Elastic N.V. (NYSE:ESTC) was held by Sylebra Capital Management, which reported holding $675.8 million worth of stock at the end of September. It was followed by Tiger Global Management LLC with a $598.9 million position. Other investors bullish on the company included Whale Rock Capital Management, Marcho Partners, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Sylebra Capital Management allocated the biggest weight to Elastic N.V. (NYSE:ESTC), around 15.21% of its 13F portfolio. Greenhaven Road Investment Management is also relatively very bullish on the stock, dishing out 11.77 percent of its 13F equity portfolio to ESTC.

Consequently, key money managers have been driving this bullishness. Honeycomb Asset Management, managed by David Fiszel, initiated the most valuable position in Elastic N.V. (NYSE:ESTC). Honeycomb Asset Management had $46.9 million invested in the company at the end of the quarter. Aaron Cowen's Suvretta Capital Management also made a $40.4 million investment in the stock during the quarter. The other funds with brand new ESTC positions are Peter S. Park's Park West Asset Management, Richard Gerson and Navroz D. Udwadia's Falcon Edge Capital, and Joseph Samuels's Islet Management.

Let's now take a look at hedge fund activity in other stocks similar to Elastic N.V. (NYSE:ESTC). These stocks are Leidos Holdings Inc (NYSE:LDOS), The Mosaic Company (NYSE:MOS), Vail Resorts, Inc. (NYSE:MTN), Suzano S.A. (NYSE:SUZ), GameStop Corp. (NYSE:GME), Howmet Aerospace Inc. (NYSE:HWM), and Futu Holdings Limited (NASDAQ:FUTU). All of these stocks' market caps are similar to ESTC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LDOS,14,206379,-8 MOS,40,912653,-3 MTN,40,644916,0 SUZ,6,47280,2 GME,9,80933,-9 HWM,44,3495496,-3 FUTU,23,664044,-8 Average,25.1,864529,-4.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $865 million. That figure was $2986 million in ESTC's case. Howmet Aerospace Inc. (NYSE:HWM) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Elastic N.V. (NYSE:ESTC) is more popular among hedge funds. Our overall hedge fund sentiment score for ESTC is 89. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately ESTC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ESTC were disappointed as the stock returned 4.3% since the end of the third quarter (through 11/30) 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 most of these stocks already outperformed the market since 2019.

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