The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article we look at what those investors think of Cloudflare, Inc. (NYSE:NET).
Cloudflare, Inc. (NYSE:NET) was in 33 hedge funds' portfolios at the end of September. NET has experienced an increase in support from the world's most elite money managers in recent months. There were 0 hedge funds in our database with NET positions at the end of the previous quarter. Our calculations also showed that NET isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26082" align="aligncenter" width="600"] Andreas Halvorsen of Viking Global[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to check out the new hedge fund action regarding Cloudflare, Inc. (NYSE:NET).
What have hedge funds been doing with Cloudflare, Inc. (NYSE:NET)?
Heading into the fourth quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33 from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in NET a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Viking Global was the largest shareholder of Cloudflare, Inc. (NYSE:NET), with a stake worth $27 million reported as of the end of September. Trailing Viking Global was Strycker View Capital, which amassed a stake valued at $17.1 million. Pelham Capital, Indus Capital, and Element Capital 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 Strycker View Capital allocated the biggest weight to Cloudflare, Inc. (NYSE:NET), around 6.78% of its portfolio. Pelham Capital is also relatively very bullish on the stock, setting aside 1.56 percent of its 13F equity portfolio to NET.
Consequently, key money managers have jumped into Cloudflare, Inc. (NYSE:NET) headfirst. Viking Global, managed by Andreas Halvorsen, created the biggest position in Cloudflare, Inc. (NYSE:NET). Viking Global had $27 million invested in the company at the end of the quarter. Usman Waheed's Strycker View Capital also made a $17.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Ross Turner's Pelham Capital, David Kowitz and Sheldon Kasowitz's Indus Capital, and Jeffrey Talpins's Element Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cloudflare, Inc. (NYSE:NET) but similarly valued. These stocks are Suzano S.A. (NYSE:SUZ), Amarin Corporation plc (NASDAQ:AMRN), Grupo Aeroportuario del Pacifico (NYSE:PAC), and L Brands Inc (NYSE:LB). All of these stocks' market caps resemble NET's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SUZ,4,36039,2 AMRN,29,1392510,-4 PAC,3,93322,-1 LB,36,542095,6 Average,18,515992,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $516 million. That figure was $145 million in NET's case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (NYSE:PAC) is the least popular one with only 3 bullish hedge fund positions. Cloudflare, Inc. (NYSE:NET) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NET wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NET were disappointed as the stock returned 4.9% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.