Do Hedge Funds Love Check Point Software Technologies Ltd. (CHKP)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 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. In this article we look at what those investors think of Check Point Software Technologies Ltd. (NASDAQ:CHKP).

Is Check Point Software Technologies Ltd. (NASDAQ:CHKP) a superb investment right now? Hedge funds were taking a bullish view. The number of bullish hedge fund positions went up by 5 lately. Check Point Software Technologies Ltd. (NASDAQ:CHKP) was in 31 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that CHKP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a gander at the fresh hedge fund action encompassing Check Point Software Technologies Ltd. (NASDAQ:CHKP).

Do Hedge Funds Think CHKP Is A Good Stock To Buy Now?

At the end of March, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the fourth quarter of 2020. On the other hand, there were a total of 29 hedge funds with a bullish position in CHKP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Alyeska Investment Group was the largest shareholder of Check Point Software Technologies Ltd. (NASDAQ:CHKP), with a stake worth $71.4 million reported as of the end of March. Trailing Alyeska Investment Group was Arrowstreet Capital, which amassed a stake valued at $69.8 million. Ariel Investments, Citadel Investment Group, and D E Shaw 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 Te Ahumairangi Investment Management allocated the biggest weight to Check Point Software Technologies Ltd. (NASDAQ:CHKP), around 1.71% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, dishing out 1.04 percent of its 13F equity portfolio to CHKP.

As aggregate interest increased, key money managers were leading the bulls’ herd. Alyeska Investment Group, managed by Anand Parekh, assembled the biggest position in Check Point Software Technologies Ltd. (NASDAQ:CHKP). Alyeska Investment Group had $71.4 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $6.9 million position during the quarter. The following funds were also among the new CHKP investors: Qing Li’s Sciencast Management, Alec Litowitz and Ross Laser’s Magnetar Capital, and Michael Gelband’s ExodusPoint Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Check Point Software Technologies Ltd. (NASDAQ:CHKP) but similarly valued. We will take a look at Duke Realty Corporation (NYSE:DRE), Zendesk Inc (NYSE:ZEN), WPP Plc (NYSE:WPP), Grifols SA (NASDAQ:GRFS), Arch Capital Group Ltd. (NASDAQ:ACGL), Avangrid, Inc. (NYSE:AGR), and Masco Corporation (NYSE:MAS). This group of stocks’ market values are similar to CHKP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DRE 20 279688 3
ZEN 45 1483992 -13
WPP 5 34389 -1
GRFS 12 321129 -5
ACGL 34 1671185 0
AGR 15 58976 5
MAS 33 686447 -7
Average 23.4 647972 -2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $648 million. That figure was $495 million in CHKP’s case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand WPP Plc (NYSE:WPP) is the least popular one with only 5 bullish hedge fund positions. Check Point Software Technologies Ltd. (NASDAQ:CHKP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CHKP is 69.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately CHKP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CHKP were disappointed as the stock returned 4.4% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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