Do Hedge Funds Love MicroStrategy Incorporated (MSTR)?

We at Insider Monkey have gone over 866 13F filings that hedge funds and prominent 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 funds think of MicroStrategy Incorporated (NASDAQ:MSTR) based on that data.

MicroStrategy Incorporated (NASDAQ:MSTR) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. MicroStrategy Incorporated (NASDAQ:MSTR) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 28. Our calculations also showed that MSTR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. With all of this in mind let’s take a look at the latest hedge fund action encompassing MicroStrategy Incorporated (NASDAQ:MSTR).

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

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MSTR over the last 23 quarters. So, let’s check out 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, Citadel Investment Group, managed by Ken Griffin, holds the number one position in MicroStrategy Incorporated (NASDAQ:MSTR). Citadel Investment Group has a $156.1 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $37.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers that hold long positions consist of Matthew Hulsizer’s PEAK6 Capital Management, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Glaxis Capital Management allocated the biggest weight to MicroStrategy Incorporated (NASDAQ:MSTR), around 3.79% of its 13F portfolio. Graham Capital Management is also relatively very bullish on the stock, setting aside 0.5 percent of its 13F equity portfolio to MSTR.

Consequently, key money managers have jumped into MicroStrategy Incorporated (NASDAQ:MSTR) headfirst. Hudson Bay Capital Management, managed by Sander Gerber, established the most valuable position in MicroStrategy Incorporated (NASDAQ:MSTR). Hudson Bay Capital Management had $8.8 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $2.6 million investment in the stock during the quarter. The other funds with brand new MSTR positions are Noam Gottesman’s GLG Partners, Greg Eisner’s Engineers Gate Manager, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s also examine hedge fund activity in other stocks similar to MicroStrategy Incorporated (NASDAQ:MSTR). We will take a look at The AZEK Company Inc. (NYSE:AZEK), Wyndham Hotels & Resorts, Inc. (NYSE:WH), ANGI Inc. (NASDAQ:ANGI), Littelfuse, Inc. (NASDAQ:LFUS), Penske Automotive Group, Inc. (NYSE:PAG), Life Storage, Inc. (NYSE:LSI), and OGE Energy Corp. (NYSE:OGE). This group of stocks’ market caps are closest to MSTR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AZEK 29 252039 6
WH 24 838355 -2
ANGI 35 309329 4
LFUS 21 451577 0
PAG 12 188294 -9
LSI 26 214869 9
OGE 23 119911 3
Average 24.3 339196 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $132 million in MSTR’s case. ANGI Inc. (NASDAQ:ANGI) is the most popular stock in this table. On the other hand Penske Automotive Group, Inc. (NYSE:PAG) is the least popular one with only 12 bullish hedge fund positions. MicroStrategy Incorporated (NASDAQ:MSTR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MSTR is 48.8. 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 negative signal and 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately MSTR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MSTR investors were disappointed as the stock returned -22.9% since the end of March (through 7/16) 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 most of these stocks already outperformed the market in 2021.

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