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Where Do Hedge Funds Stand On CommVault Systems, Inc. (CVLT)?

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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of CommVault Systems, Inc. (NASDAQ:CVLT) based on that data.

CommVault Systems, Inc. (NASDAQ:CVLT) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 23 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that CVLT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare CVLT to other stocks including Atlantic Union Bankshares Corporation (NASDAQ:AUB), John Wiley & Sons Inc (NYSE:JW), and ExlService Holdings, Inc. (NASDAQ:EXLS) to get a better sense of its popularity.

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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Jeff Smith
Jeff Smith

Jeffrey Smith of Starboard Value LP

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Keeping this in mind we're going to analyze the latest hedge fund action encompassing CommVault Systems, Inc. (NASDAQ:CVLT).

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

At Q1's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2020. On the other hand, there were a total of 18 hedge funds with a bullish position in CVLT 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.

Of the funds tracked by Insider Monkey, Starboard Value LP, managed by Jeffrey Smith, holds the most valuable position in CommVault Systems, Inc. (NASDAQ:CVLT). Starboard Value LP has a $280.4 million position in the stock, comprising 6% of its 13F portfolio. Coming in second is Renaissance Technologies, which holds a $148 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, D. E. Shaw's D E Shaw and Cynthia Paul's Lynrock Lake. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to CommVault Systems, Inc. (NASDAQ:CVLT), around 5.98% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, dishing out 1.52 percent of its 13F equity portfolio to CVLT.

Seeing as CommVault Systems, Inc. (NASDAQ:CVLT) has witnessed bearish sentiment from the smart money, it's safe to say that there is a sect of hedgies that slashed their entire stakes in the first quarter. At the top of the heap, Mark Coe's Intrinsic Edge Capital cut the largest position of the "upper crust" of funds monitored by Insider Monkey, comprising about $20.9 million in stock. Jeffrey Bronchick's fund, Cove Street Capital, also cut its stock, about $14.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks similar to CommVault Systems, Inc. (NASDAQ:CVLT). These stocks are Atlantic Union Bankshares Corporation (NASDAQ:AUB), John Wiley & Sons Inc (NYSE:JW), ExlService Holdings, Inc. (NASDAQ:EXLS), PureCycle Technologies, Inc. (NASDAQ:PCT), American Equity Investment Life Holding Company (NYSE:AEL), Tower Semiconductor Ltd. (NASDAQ:TSEM), and Trupanion Inc (NASDAQ:TRUP). This group of stocks' market valuations are similar to CVLT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AUB,11,42633,3 JW,16,190834,2 EXLS,14,72523,-2 PCT,21,659105,21 AEL,24,262302,1 TSEM,19,389665,2 TRUP,17,209492,-1 Average,17.4,260936,3.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $534 million in CVLT's case. American Equity Investment Life Holding Company (NYSE:AEL) is the most popular stock in this table. On the other hand Atlantic Union Bankshares Corporation (NASDAQ:AUB) is the least popular one with only 11 bullish hedge fund positions. CommVault Systems, Inc. (NASDAQ:CVLT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CVLT is 72.1. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on CVLT as the stock returned 18.8% since the end of Q1 (through 7/16) 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.