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Did Hedge Funds Drop The Ball On Cyberark Software Ltd (CYBR) ?

Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Cyberark Software Ltd (NASDAQ:CYBR).

Is Cyberark Software Ltd (NASDAQ:CYBR) a splendid investment today? Investors who are in the know are taking a bearish view. The number of long hedge fund positions retreated by 1 recently. Our calculations also showed that CYBR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the key hedge fund action regarding Cyberark Software Ltd (NASDAQ:CYBR).

How have hedgies been trading Cyberark Software Ltd (NASDAQ:CYBR)?

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CYBR over the last 17 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Robert G. Moses’s RGM Capital has the largest position in Cyberark Software Ltd (NASDAQ:CYBR), worth close to $74.7 million, accounting for 5% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $43.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions contain John Overdeck and David Siegel’s Two Sigma Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position RGM Capital allocated the biggest weight to Cyberark Software Ltd (NASDAQ:CYBR), around 4.98% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, dishing out 0.87 percent of its 13F equity portfolio to CYBR.

Since Cyberark Software Ltd (NASDAQ:CYBR) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few fund managers who sold off their full holdings heading into Q4. Interestingly, Richard Driehaus’s Driehaus Capital dumped the biggest stake of all the hedgies followed by Insider Monkey, worth about $8.2 million in stock, and James Crichton’s Hitchwood Capital Management was right behind this move, as the fund cut about $6.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cyberark Software Ltd (NASDAQ:CYBR) but similarly valued. We will take a look at DCP Midstream LP (NYSE:DCP), Cameco Corporation (NYSE:CCJ), SLM Corporation (NASDAQ:SLM), and Antero Midstream Corporation (NYSE:AM). This group of stocks’ market valuations are closest to CYBR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DCP 3 8420 1
CCJ 25 384721 1
SLM 25 501007 -7
AM 16 138560 1
Average 17.25 258177 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $257 million in CYBR’s case. Cameco Corporation (NYSE:CCJ) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 3 bullish hedge fund positions. Cyberark Software Ltd (NASDAQ:CYBR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on CYBR as the stock returned 22.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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