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Check Point Software Technologies Ltd. (CHKP): Are Hedge Funds Right About This Stock?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Check Point Software Technologies Ltd. (NASDAQ:CHKP).

Check Point Software Technologies Ltd. (NASDAQ:CHKP) was in 29 hedge funds’ portfolios at the end of March. CHKP investors should be aware of a decrease in hedge fund interest of late. There were 30 hedge funds in our database with CHKP positions at the end of the previous quarter. Our calculations also showed that CHKP isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the fresh hedge fund action surrounding Check Point Software Technologies Ltd. (NASDAQ:CHKP).

Hedge fund activity in Check Point Software Technologies Ltd. (NASDAQ:CHKP)

At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the fourth quarter of 2019. On the other hand, there were a total of 24 hedge funds with a bullish position in CHKP a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Nicolai Tangen’s Ako Capital has the most valuable position in Check Point Software Technologies Ltd. (NASDAQ:CHKP), worth close to $156.6 million, accounting for 3.3% of its total 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $108.4 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions include Noam Gottesman’s GLG Partners, D. E. Shaw’s D E Shaw and Renaissance Technologies. In terms of the portfolio weights assigned to each position TAM Capital Management allocated the biggest weight to Check Point Software Technologies Ltd. (NASDAQ:CHKP), around 96.23% of its 13F portfolio. Ako Capital is also relatively very bullish on the stock, earmarking 3.3 percent of its 13F equity portfolio to CHKP.

Judging by the fact that Check Point Software Technologies Ltd. (NASDAQ:CHKP) has witnessed bearish sentiment from the smart money, we can see that there lies a certain “tier” of funds that elected to cut their positions entirely by the end of the first quarter. It’s worth mentioning that John Brennan’s Sirios Capital Management cut the biggest stake of the 750 funds tracked by Insider Monkey, worth about $30.4 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund sold off about $3.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Check Point Software Technologies Ltd. (NASDAQ:CHKP). We will take a look at IAC/InterActiveCorp (NASDAQ:IAC), Skyworks Solutions Inc (NASDAQ:SWKS), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), and Marvell Technology Group Ltd. (NASDAQ:MRVL). This group of stocks’ market valuations match CHKP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IAC 57 2692755 -14
SWKS 29 768807 -14
BMRN 54 1567492 5
MRVL 29 498283 0
Average 42.25 1381834 -5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.25 hedge funds with bullish positions and the average amount invested in these stocks was $1382 million. That figure was $599 million in CHKP’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Skyworks Solutions Inc (NASDAQ:SWKS) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Check Point Software Technologies Ltd. (NASDAQ:CHKP) is even less popular than SWKS. Hedge funds dodged a bullet by taking a bearish stance towards CHKP. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately CHKP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CHKP investors were disappointed as the stock returned 9.1% during the second quarter (through the end of May) 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 most of these stocks already outperformed the market so far in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.