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Did Hedge Funds Make The Right Call On Cloudera, Inc. (CLDR) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Cloudera, Inc. (NYSE:CLDR) and determine whether hedge funds skillfully traded this stock.

Cloudera, Inc. (NYSE:CLDR) has experienced an increase in hedge fund interest of late. Our calculations also showed that CLDR 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.

Robert Moses RGM Capital

Robert Moses of RGM Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind we’re going to analyze the fresh hedge fund action surrounding Cloudera, Inc. (NYSE:CLDR).

What does smart money think about Cloudera, Inc. (NYSE:CLDR)?

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the fourth quarter of 2019. By comparison, 32 hedge funds held shares or bullish call options in CLDR 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.

When looking at the institutional investors followed by Insider Monkey, Icahn Capital LP, managed by Carl Icahn, holds the number one position in Cloudera, Inc. (NYSE:CLDR). Icahn Capital LP has a $431.2 million position in the stock, comprising 2.4% of its 13F portfolio. The second largest stake is held by Robert G. Moses of RGM Capital, with a $55.7 million position; the fund has 4.4% of its 13F portfolio invested in the stock. Remaining peers that hold long positions consist of Christopher Shackelton and Adam Gray’s Coliseum Capital, Renaissance Technologies and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to Cloudera, Inc. (NYSE:CLDR), around 6.65% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, setting aside 4.38 percent of its 13F equity portfolio to CLDR.

As aggregate interest increased, key money managers were leading the bulls’ herd. Coliseum Capital, managed by Christopher Shackelton and Adam Gray, established the most outsized position in Cloudera, Inc. (NYSE:CLDR). Coliseum Capital had $24.6 million invested in the company at the end of the quarter. George McCabe’s Portolan Capital Management also initiated a $5.8 million position during the quarter. The following funds were also among the new CLDR investors: Noam Gottesman’s GLG Partners, Peter Muller’s PDT Partners, and Cliff Asness’s AQR Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cloudera, Inc. (NYSE:CLDR) but similarly valued. These stocks are Atlantica Sustainable Infrastructure plc (NASDAQ:AY), Brooks Automation, Inc. (NASDAQ:BRKS), Mercury General Corporation (NYSE:MCY), and Sabra Health Care REIT Inc (NASDAQ:SBRA). This group of stocks’ market valuations match CLDR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AY 13 77287 -3
BRKS 18 98547 -10
MCY 22 193565 1
SBRA 17 146830 -10
Average 17.5 129057 -5.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $584 million in CLDR’s case. Mercury General Corporation (NYSE:MCY) is the most popular stock in this table. On the other hand Atlantica Sustainable Infrastructure plc (NASDAQ:AY) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Cloudera, Inc. (NYSE:CLDR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on CLDR as the stock returned 61.6% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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