Hedge Funds Are Absolutely Crazy About CrowdStrike Holdings (CRWD)

In this article we will take a look at whether hedge funds think CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is CrowdStrike Holdings, Inc. (NASDAQ:CRWD) an outstanding stock to buy now? The smart money is becoming hopeful. The number of bullish hedge fund bets inched up by 17 recently. Our calculations also showed that CRWD 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 44 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.

Ryan Frick Dorsal Capital

Ryan Frick of Dorsal Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“.  We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the new hedge fund action surrounding CrowdStrike Holdings, Inc. (NASDAQ:CRWD).

What does smart money think about CrowdStrike Holdings, Inc. (NASDAQ:CRWD)?

At the end of the first quarter, a total of 65 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 35% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CRWD over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Alex Sacerdote’s Whale Rock Capital Management has the most valuable position in CrowdStrike Holdings, Inc. (NASDAQ:CRWD), worth close to $178.8 million, comprising 2.4% of its total 13F portfolio. The second most bullish fund manager is Coatue Management, managed by Philippe Laffont, which holds a $177 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions consist of David Goel and Paul Ferri’s Matrix Capital Management, Ken Griffin’s Citadel Investment Group and Brian Ashford-Russell and Tim Woolley’s Polar Capital. In terms of the portfolio weights assigned to each position Stony Point Capital allocated the biggest weight to CrowdStrike Holdings, Inc. (NASDAQ:CRWD), around 4.31% of its 13F portfolio. Dorsal Capital Management is also relatively very bullish on the stock, dishing out 4.28 percent of its 13F equity portfolio to CRWD.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Coatue Management, managed by Philippe Laffont, assembled the most valuable position in CrowdStrike Holdings, Inc. (NASDAQ:CRWD). Coatue Management had $177 million invested in the company at the end of the quarter. David Goel and Paul Ferri’s Matrix Capital Management also initiated a $135.6 million position during the quarter. The following funds were also among the new CRWD investors: Brian Ashford-Russell and Tim Woolley’s Polar Capital, Brandon Haley’s Holocene Advisors, and Ryan Frick and Oliver Evans’s Dorsal Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CrowdStrike Holdings, Inc. (NASDAQ:CRWD) but similarly valued. These stocks are Rollins, Inc. (NYSE:ROL), Alliant Energy Corporation (NASDAQ:LNT), Martin Marietta Materials, Inc. (NYSE:MLM), and Mid America Apartment Communities Inc (NYSE:MAA). This group of stocks’ market valuations resemble CRWD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ROL 25 447589 -9
LNT 30 602098 2
MLM 44 1436776 -8
MAA 26 244541 2
Average 31.25 682751 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $683 million. That figure was $1302 million in CRWD’s case. Martin Marietta Materials, Inc. (NYSE:MLM) is the most popular stock in this table. On the other hand Rollins, Inc. (NYSE:ROL) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks CrowdStrike Holdings, Inc. (NASDAQ:CRWD) 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 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on CRWD as the stock returned 47.7% so far in Q2 (through May 22nd) 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.

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