Hedge Funds Are Coming Back To Cloudflare, Inc. (NET)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Cloudflare, Inc. (NYSE:NET) based on that data.

Cloudflare, Inc. (NYSE:NET) shareholders have witnessed an increase in enthusiasm from smart money of late. Cloudflare, Inc. (NYSE:NET) was in 50 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 60. There were 43 hedge funds in our database with NET holdings at the end of June. Our calculations also showed that NET isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s take a gander at the key hedge fund action surrounding Cloudflare, Inc. (NYSE:NET).

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

At the end of the third quarter, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the second quarter of 2021. On the other hand, there were a total of 44 hedge funds with a bullish position in NET a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in Cloudflare, Inc. (NYSE:NET), which was worth $129.2 million at the end of the third quarter. On the second spot was D E Shaw which amassed $106.5 million worth of shares. Citadel Investment Group, SW Investment Management, and Strategy Capital 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 SW Investment Management allocated the biggest weight to Cloudflare, Inc. (NYSE:NET), around 24.65% of its 13F portfolio. Whetstone Capital Advisors is also relatively very bullish on the stock, designating 9.88 percent of its 13F equity portfolio to NET.

As aggregate interest increased, specific money managers have jumped into Cloudflare, Inc. (NYSE:NET) headfirst. Renaissance Technologies, created the biggest position in Cloudflare, Inc. (NYSE:NET). Renaissance Technologies had $25.5 million invested in the company at the end of the quarter. Jose Fernandez’s Stepstone Group also made a $13 million investment in the stock during the quarter. The following funds were also among the new NET investors: Jeffrey Diehl’s Adams Street Partners, Benjamin A. Smith’s Laurion Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cloudflare, Inc. (NYSE:NET) but similarly valued. We will take a look at Mizuho Financial Group Inc. (NYSE:MFG), Robinhood Markets Inc. (NASDAQ:HOOD), Parker-Hannifin Corporation (NYSE:PH), AutoZone, Inc. (NYSE:AZO), Unity Software Inc. (NYSE:U), DuPont de Nemours Inc (NYSE:DD), and KKR & Co Inc. (NYSE:KKR). This group of stocks’ market values are similar to NET’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $3107 million. That figure was $958 million in NET’s case. KKR & Co Inc. (NYSE:KKR) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 6 bullish hedge fund positions. Cloudflare, Inc. (NYSE:NET) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NET is 79. 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. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on NET as the stock returned 67.1% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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