Were These Hedge Funds Right About Piling Into Cloudera, Inc. (CLDR)?
Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Cloudera, Inc. (NYSE:CLDR) changed recently.
Cloudera, Inc. (NYSE:CLDR) has experienced an increase in support from the world's most elite money managers recently. Cloudera, Inc. (NYSE:CLDR) was in 33 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CLDR isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Hondros of AlphaOne Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best high dividend stocks to buy to identify high dividend stocks with upside potential in this low interest rate environment. 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 to get excerpts of these letters in your inbox. Now we're going to take a glance at the recent hedge fund action regarding Cloudera, Inc. (NYSE:CLDR).
What have hedge funds been doing with Cloudera, Inc. (NYSE:CLDR)?
At Q2's end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in CLDR over the last 20 quarters. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Icahn Capital LP held the most valuable stake in Cloudera, Inc. (NYSE:CLDR), which was worth $665.6 million at the end of the third quarter. On the second spot was RGM Capital which amassed $84.6 million worth of shares. Portolan Capital Management, Royce & Associates, and Citadel Investment Group 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 RGM Capital allocated the biggest weight to Cloudera, Inc. (NYSE:CLDR), around 5.09% of its 13F portfolio. Icahn Capital LP is also relatively very bullish on the stock, designating 3.37 percent of its 13F equity portfolio to CLDR.
Consequently, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in Cloudera, Inc. (NYSE:CLDR). Arrowstreet Capital had $10.8 million invested in the company at the end of the quarter. David Brown's Hawk Ridge Management also initiated a $4 million position during the quarter. The other funds with brand new CLDR positions are Mark Coe's Intrinsic Edge Capital, Paul Hondros's AlphaOne Capital Partners, and Michael Gelband's ExodusPoint Capital.
Let's now review hedge fund activity in other stocks similar to Cloudera, Inc. (NYSE:CLDR). We will take a look at Ballard Power Systems Inc. (NASDAQ:BLDP), Novanta Inc. (NASDAQ:NOVT), Portland General Electric Company (NYSE:POR), Perspecta Inc. (NYSE:PRSP), BRP Inc. (NASDAQ:DOOO), Curtiss-Wright Corp. (NYSE:CW), and YETI Holdings, Inc. (NYSE:YETI). This group of stocks' market valuations are closest to CLDR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BLDP,16,76980,6 NOVT,18,103718,8 POR,21,164563,-2 PRSP,46,653988,14 DOOO,14,149741,4 CW,26,257924,5 YETI,22,155265,2 Average,23.3,223168,5.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $223 million. That figure was $856 million in CLDR's case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 14 bullish hedge fund positions. Cloudera, Inc. (NYSE:CLDR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CLDR is 69.7. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and beat the market again by 20.1 percentage points. Unfortunately CLDR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CLDR were disappointed as the stock returned -23.6% since the end of June (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
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