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Hedge Fund Favorites vs. salesforce.com, inc. (CRM) In 2019

It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like salesforce.com, inc. (NYSE:CRM) and compare its performance against hedge funds’ favorite stocks.

salesforce.com, inc. (NYSE:CRM) was in 102 hedge funds’ portfolios at the end of the third quarter of 2019. CRM has seen an increase in enthusiasm from smart money in recent months. There were 82 hedge funds in our database with CRM positions at the end of the previous quarter. Our calculations also showed that CRM currently ranks 11th among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

If you’d ask most traders, hedge funds are assumed to be underperforming, outdated investment vehicles of years past. While there are greater than 8000 funds with their doors open today, We choose to focus on the upper echelon of this group, about 750 funds. These money managers control most of the smart money’s total asset base, and by shadowing their matchless investments, Insider Monkey has formulated a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Andreas Halvorsen

Andreas Halvorsen of Viking Global

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s take a glance at the fresh hedge fund action regarding salesforce.com, inc. (NYSE:CRM).

What have hedge funds been doing with salesforce.com, inc. (NYSE:CRM)?

At Q3’s end, a total of 102 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the previous quarter. By comparison, 86 hedge funds held shares or bullish call options in CRM a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in salesforce.com, inc. (NYSE:CRM). Fisher Asset Management has a $1.0784 billion position in the stock, comprising 1.2% of its 13F portfolio. On Fisher Asset Management’s heels is Lone Pine Capital which holds a $757.8 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Some other peers with similar optimism encompass David Goel and Paul Ferri’s Matrix Capital Management, Andreas Halvorsen’s Viking Global and Brad Gerstner’s Altimeter Capital Management. In terms of the portfolio weights assigned to each position HMI Capital allocated the biggest weight to salesforce.com, inc. (NYSE:CRM), around 23.7% of its 13F portfolio. Matrix Capital Management is also relatively very bullish on the stock, dishing out 18.38 percent of its 13F equity portfolio to CRM.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, assembled the largest position in salesforce.com, inc. (NYSE:CRM). Holocene Advisors had $283.8 million invested in the company at the end of the quarter. John Armitage’s Egerton Capital Limited also initiated a $283 million position during the quarter. The other funds with brand new CRM positions are Mick Hellman’s HMI Capital, Daniel Sundheim’s D1 Capital Partners, and Ryan Frick and Oliver Evans’s Dorsal Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as salesforce.com, inc. (NYSE:CRM) but similarly valued. These stocks are BP plc (NYSE:BP), International Business Machines Corporation (NYSE:IBM), Costco Wholesale Corporation (NASDAQ:COST), and BHP Group (NYSE:BHP). This group of stocks’ market valuations resemble CRM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BP 36 1617309 7
IBM 42 1569607 -3
COST 51 3861914 11
BHP 21 800372 2
Average 37.5 1962301 4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $1962 million. That figure was $9433 million in CRM’s case. Costco Wholesale Corporation (NASDAQ:COST) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks salesforce.com, inc. (NYSE:CRM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately CRM wasn’t nearly as successful as these 20 stocks and hedge funds that were betting on CRM were disappointed as the stock returned 19.5% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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