Did Hedge Funds Make The Right Call On CommVault Systems, Inc. (CVLT) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtCommVault Systems, Inc. (NASDAQ:CVLT) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

CommVault Systems, Inc. (NASDAQ:CVLT) has experienced a decrease in support from the world’s most elite money managers lately. CVLT was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. There were 33 hedge funds in our database with CVLT positions at the end of the previous quarter. Our calculations also showed that CVLT 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.

At the moment there are a lot of signals stock traders can use to value their holdings. A couple of the most under-the-radar signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can trounce the market by a solid amount (see the details here).

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s take a gander at the new hedge fund action surrounding CommVault Systems, Inc. (NASDAQ:CVLT).

What does smart money think about CommVault Systems, Inc. (NASDAQ:CVLT)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -45% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in CVLT a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Is CVLT A Good Stock To Buy?

More specifically, Starboard Value LP was the largest shareholder of CommVault Systems, Inc. (NASDAQ:CVLT), with a stake worth $186.9 million reported as of the end of September. Trailing Starboard Value LP was Renaissance Technologies, which amassed a stake valued at $90.3 million. Citadel Investment Group, D E Shaw, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to CommVault Systems, Inc. (NASDAQ:CVLT), around 7.58% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, setting aside 3 percent of its 13F equity portfolio to CVLT.

Because CommVault Systems, Inc. (NASDAQ:CVLT) has faced a decline in interest from hedge fund managers, we can see that there is a sect of hedge funds who were dropping their entire stakes in the first quarter. Interestingly, Ken Grossman and Glen Schneider’s SG Capital Management dumped the biggest stake of all the hedgies watched by Insider Monkey, totaling about $10.5 million in stock. Mark Coe’s fund, Intrinsic Edge Capital, also sold off its stock, about $7.1 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 15 funds in the first quarter.

Let’s check out hedge fund activity in other stocks similar to CommVault Systems, Inc. (NASDAQ:CVLT). We will take a look at Wintrust Financial Corporation (NASDAQ:WTFC), Amkor Technology, Inc. (NASDAQ:AMKR), First Interstate Bancsystem Inc (NASDAQ:FIBK), and Commercial Metals Company (NYSE:CMC). All of these stocks’ market caps are similar to CVLT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WTFC 27 152618 6
AMKR 28 86455 -1
FIBK 7 31332 -5
CMC 19 187336 -8
Average 20.25 114435 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $464 million in CVLT’s case. Amkor Technology, Inc. (NASDAQ:AMKR) is the most popular stock in this table. On the other hand First Interstate Bancsystem Inc (NASDAQ:FIBK) is the least popular one with only 7 bullish hedge fund positions. CommVault Systems, Inc. (NASDAQ:CVLT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately CVLT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CVLT investors were disappointed as the stock returned -3.2% since Q1 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 in 2020.

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