The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Check Point Software Technologies Ltd. (NASDAQ:CHKP), and what that likely means for the prospects of the company and its stock.
Check Point Software Technologies Ltd. (NASDAQ:CHKP) has experienced a decrease in enthusiasm from smart money lately. At the end of this article, we will also compare Check Point Software Technologies Ltd. (NASDAQ:CHKP) to other stocks, including National-Oilwell Varco, Inc. (NYSE:NOV), DTE Energy Co (NYSE:DTE), and Republic Services, Inc. (NYSE:RSG) to get a better sense of its popularity.
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If you’d ask most traders, hedge funds are viewed as unimportant, old investment tools of the past. While there are more than 8000 funds trading today, our researchers hone in on the moguls of this club, around 700 funds. These money managers shepherd most of all hedge funds’ total asset base, and by keeping track of their highest performing investments, Insider Monkey has spotted various investment strategies that have historically beaten the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Keeping this in mind, let’s take a gander at the latest action regarding Check Point Software Technologies Ltd. (NASDAQ:CHKP).
How are hedge funds trading Check Point Software Technologies Ltd. (NASDAQ:CHKP)?
At the end of Q3, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 24% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, David Blood and Al Gore’s Generation Investment Management has the most valuable position in Check Point Software Technologies Ltd. (NASDAQ:CHKP), worth close to $482.9 million, amounting to 7% of its total 13F portfolio. The second largest stake is held by Iridian Asset Management, managed by David Cohen and Harold Levy, which holds a $416.7 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish comprise David Gallo’s Valinor Management LLC, John Overdeck and David Siegel’s Two Sigma Advisors and D. E. Shaw’s D E Shaw.
Because Check Point Software Technologies Ltd. (NASDAQ:CHKP) has experienced a declination in interest from the aggregate hedge fund industry, logic holds that there were a few hedge funds that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the largest stake of the 700 funds tracked by Insider Monkey, comprising about $79.2 million in call options.. Michael Hintze’s fund, CQS Cayman LP, also dropped its call options., about $15.9 million worth of shares. These transactions are interesting, as aggregate hedge fund interest was cut by 10 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Check Point Software Technologies Ltd. (NASDAQ:CHKP). These stocks are National-Oilwell Varco, Inc. (NYSE:NOV), DTE Energy Co (NYSE:DTE), Republic Services, Inc. (NYSE:RSG), and Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF). All of these stocks’ market caps are similar to Check Point Software Technologies Ltd. (NASDAQ:CHKP)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOV | 28 | 1346280 | 0 |
| DTE | 16 | 542869 | -3 |
| RSG | 30 | 373672 | 0 |
| KOF | 11 | 492649 | 3 |
As you can see, these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $689 million. That figure was $1.42 billion in Check Point Software Technologies Ltd. (NASDAQ:CHKP)’s case. Republic Services, Inc. (NYSE:RSG) is the most popular stock in this table. On the other hand, Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks, Check Point Software Technologies Ltd. (NASDAQ:CHKP) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
