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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding MongoDB, Inc. (NASDAQ:MDB).
Is MDB a good stock to buy now? MongoDB, Inc. (NASDAQ:MDB) was in 42 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. MDB has experienced an increase in activity from the world's largest hedge funds recently. There were 37 hedge funds in our database with MDB positions at the end of the second quarter. Our calculations also showed that MDB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most stock holders, hedge funds are viewed as worthless, outdated financial vehicles of yesteryear. While there are more than 8000 funds with their doors open today, Our researchers hone in on the leaders of this club, about 850 funds. These investment experts orchestrate the lion's share of the smart money's total asset base, and by tailing their highest performing stock picks, Insider Monkey has figured out various investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Chase Coleman of Tiger Global
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to take a gander at the new hedge fund action encompassing MongoDB, Inc. (NASDAQ:MDB).
Do Hedge Funds Think MDB Is A Good Stock To Buy Now?
At third quarter's end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MDB over the last 21 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in MongoDB, Inc. (NASDAQ:MDB) was held by Tiger Global Management LLC, which reported holding $442.5 million worth of stock at the end of September. It was followed by Whale Rock Capital Management with a $273.4 million position. Other investors bullish on the company included SQN Investors, Altimeter Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position SQN Investors allocated the biggest weight to MongoDB, Inc. (NASDAQ:MDB), around 8.91% of its 13F portfolio. Whetstone Capital Advisors is also relatively very bullish on the stock, setting aside 7.21 percent of its 13F equity portfolio to MDB.
With a general bullishness amongst the heavyweights, specific money managers have jumped into MongoDB, Inc. (NASDAQ:MDB) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in MongoDB, Inc. (NASDAQ:MDB). Point72 Asset Management had $64.3 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also made a $45.5 million investment in the stock during the quarter. The other funds with brand new MDB positions are Joseph Samuels's Islet Management, Dmitry Balyasny's Balyasny Asset Management, and Michael Gelband's ExodusPoint Capital.
Let's check out hedge fund activity in other stocks similar to MongoDB, Inc. (NASDAQ:MDB). We will take a look at Nucor Corporation (NYSE:NUE), Zebra Technologies Corporation (NASDAQ:ZBRA), Kirkland Lake Gold Ltd. (NYSE:KL), Markel Corporation (NYSE:MKL), Pool Corporation (NASDAQ:POOL), Carnival Corporation & Plc (NYSE:CCL), and POSCO (NYSE:PKX). This group of stocks' market values match MDB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NUE,28,110512,2 ZBRA,44,817708,6 KL,22,513630,-1 MKL,34,1014655,1 POOL,36,916971,1 CCL,37,285153,6 PKX,11,87343,1 Average,30.3,535139,2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $535 million. That figure was $1357 million in MDB's case. Zebra Technologies Corporation (NASDAQ:ZBRA) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 11 bullish hedge fund positions. MongoDB, Inc. (NASDAQ:MDB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MDB is 87. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on MDB as the stock returned 22.2% since the end of Q3 (through 12/8) 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.