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Is NEWR Stock A Buy or Sell?

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·6 min read
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The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards New Relic Inc (NYSE:NEWR).

Is NEWR stock a buy or sell? New Relic Inc (NYSE:NEWR) has experienced a decrease in hedge fund interest lately. New Relic Inc (NYSE:NEWR) was in 30 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 44. Our calculations also showed that NEWR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Ricky Sandler's tsop 10 stock picks
Ricky Sandler's tsop 10 stock picks

Ricky Sandler of Eminence Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Now let's go over the fresh hedge fund action encompassing New Relic Inc (NYSE:NEWR).

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

At the end of December, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NEWR over the last 22 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NEWR A Good Stock To Buy?
Is NEWR A Good Stock To Buy?

More specifically, Eminence Capital was the largest shareholder of New Relic Inc (NYSE:NEWR), with a stake worth $362.3 million reported as of the end of December. Trailing Eminence Capital was Matrix Capital Management, which amassed a stake valued at $327 million. HMI Capital, Citadel Investment Group, and Archon 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 HMI Capital allocated the biggest weight to New Relic Inc (NYSE:NEWR), around 10.5% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, setting aside 8.38 percent of its 13F equity portfolio to NEWR.

Due to the fact that New Relic Inc (NYSE:NEWR) has experienced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there exists a select few hedge funds that slashed their entire stakes heading into Q1. Intriguingly, Amit Nitin Doshi's Harbor Spring Capital dumped the largest stake of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $32.5 million in stock, and Stephen Perkins's Toronado Partners was right behind this move, as the fund cut about $24.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds heading into Q1.

Let's now review hedge fund activity in other stocks similar to New Relic Inc (NYSE:NEWR). These stocks are The Chemours Company (NYSE:CC), ONE Gas Inc (NYSE:OGS), Ardagh Group S.A. (NYSE:ARD), Louisiana-Pacific Corporation (NYSE:LPX), Innovative Industrial Properties, Inc. (NYSE:IIPR), Simpson Manufacturing Co, Inc. (NYSE:SSD), and Cannae Holdings, Inc. (NYSE:CNNE). This group of stocks' market values are similar to NEWR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CC,30,508817,2 OGS,12,14005,-7 ARD,8,67850,1 LPX,41,525724,1 IIPR,23,317685,3 SSD,25,219735,8 CNNE,34,534239,5 Average,24.7,312579,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $313 million. That figure was $1239 million in NEWR's case. Louisiana-Pacific Corporation (NYSE:LPX) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 8 bullish hedge fund positions. New Relic Inc (NYSE:NEWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEWR is 57.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and beat the market again by 1.5 percentage points. Unfortunately NEWR wasn't nearly as popular as these 30 stocks and hedge funds that were betting on NEWR were disappointed as the stock returned 1.1% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.

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