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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Tenable Holdings, Inc. (NASDAQ:TENB)? The smart money sentiment can provide an answer to this question.
Is TENB a good stock to buy? The smart money was taking an optimistic view. The number of long hedge fund positions rose by 1 lately. Tenable Holdings, Inc. (NASDAQ:TENB) was in 33 hedge funds' portfolios at the end of June. The all time high for this statistic is 39. Our calculations also showed that TENB isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 32 hedge funds in our database with TENB holdings at the end of March.
According to most shareholders, hedge funds are perceived as underperforming, old investment vehicles of yesteryear. While there are over 8000 funds in operation today, Our experts look at the masters of this club, about 850 funds. These hedge fund managers preside over bulk of the hedge fund industry's total asset base, and by following their highest performing equity investments, Insider Monkey has determined a number of investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Robert G. Moses of RGM Capital
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. Now we're going to analyze the key hedge fund action encompassing Tenable Holdings, Inc. (NASDAQ:TENB).
Do Hedge Funds Think TENB Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the first quarter of 2020. By comparison, 22 hedge funds held shares or bullish call options in TENB a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, RGM Capital was the largest shareholder of Tenable Holdings, Inc. (NASDAQ:TENB), with a stake worth $137.1 million reported as of the end of June. Trailing RGM Capital was Greenvale Capital, which amassed a stake valued at $106.5 million. Polar Capital, D E Shaw, and Washington Harbour Partners 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 Greenvale Capital allocated the biggest weight to Tenable Holdings, Inc. (NASDAQ:TENB), around 11.74% of its 13F portfolio. Toronado Partners is also relatively very bullish on the stock, designating 11.41 percent of its 13F equity portfolio to TENB.
Consequently, key hedge funds have jumped into Tenable Holdings, Inc. (NASDAQ:TENB) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the most valuable position in Tenable Holdings, Inc. (NASDAQ:TENB). Point72 Asset Management had $37 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management also made a $3.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Anthony S. Daffer's Provenire Capital, and Peter Algert's Algert Global.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Tenable Holdings, Inc. (NASDAQ:TENB) but similarly valued. We will take a look at Magnite Inc. (NASDAQ:MGNI), LivePerson, Inc. (NASDAQ:LPSN), Allison Transmission Holdings Inc (NYSE:ALSN), Commscope Holding Company Inc (NASDAQ:COMM), Ryman Hospitality Properties, Inc. (NYSE:RHP), Certara, Inc. (NASDAQ:CERT), and Advanced Energy Industries, Inc. (NASDAQ:AEIS). This group of stocks' market valuations are similar to TENB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MGNI,29,260767,4 LPSN,27,207746,-4 ALSN,23,389663,-7 COMM,36,1024585,4 RHP,22,342352,0 CERT,7,124316,-5 AEIS,17,74181,-6 Average,23,346230,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $346 million. That figure was $630 million in TENB's case. Commscope Holding Company Inc (NASDAQ:COMM) is the most popular stock in this table. On the other hand Certara, Inc. (NASDAQ:CERT) is the least popular one with only 7 bullish hedge fund positions. Tenable Holdings, Inc. (NASDAQ:TENB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TENB is 76.2. 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 TENB as the stock returned 23% 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.