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Did Hedge Funds Drop The Ball On Tenable Holdings, Inc. (TENB) ?

Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. An average long/short hedge fund returned only 5% due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Tenable Holdings, Inc. (NASDAQ:TENB).

Tenable Holdings, Inc. (NASDAQ:TENB) investors should be aware of a decrease in hedge fund sentiment of late. TENB was in 15 hedge funds’ portfolios at the end of December. There were 19 hedge funds in our database with TENB holdings at the end of the previous quarter. Our calculations also showed that tenb isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Griffin CITADEL INVESTMENT GROUP

We’re going to check out the recent hedge fund action regarding Tenable Holdings, Inc. (NASDAQ:TENB).

Hedge fund activity in Tenable Holdings, Inc. (NASDAQ:TENB)

At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TENB over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with TENB Positions

Of the funds tracked by Insider Monkey, Panayotis Takis Sparaggis’s Alkeon Capital Management has the largest position in Tenable Holdings, Inc. (NASDAQ:TENB), worth close to $13.7 million, accounting for 0.1% of its total 13F portfolio. The second most bullish fund manager is Sylebra Capital Management, managed by Daniel Patrick Gibson, which holds a $6.3 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions encompass Ken Griffin’s Citadel Investment Group, Josh Goldberg’s G2 Investment Partners Management and Glenn Russell Dubin’s Highbridge Capital Management.

Seeing as Tenable Holdings, Inc. (NASDAQ:TENB) has witnessed a decline in interest from hedge fund managers, we can see that there was a specific group of funds that slashed their full holdings heading into Q3. Intriguingly, Benjamin A. Smith’s Laurion Capital Management dropped the largest position of the “upper crust” of funds watched by Insider Monkey, valued at close to $5.8 million in stock, and Christopher James’s Partner Fund Management was right behind this move, as the fund said goodbye to about $5.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to Tenable Holdings, Inc. (NASDAQ:TENB). These stocks are II-VI, Inc. (NASDAQ:IIVI), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), Main Street Capital Corporation (NYSE:MAIN), and WNS (Holdings) Limited (NYSE:WNS). All of these stocks’ market caps are similar to TENB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IIVI 22 139334 9
SAIL 22 167257 5
MAIN 9 11748 1
WNS 16 141601 2
Average 17.25 114985 4.25

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 $115 million. That figure was $49 million in TENB’s case. II-VI, Inc. (NASDAQ:IIVI) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 9 bullish hedge fund positions. Tenable Holdings, Inc. (NASDAQ:TENB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on TENB as the stock returned 42.5% and outperformed the market by an even larger margin.

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

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