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 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded MicroStrategy Incorporated (NASDAQ:MSTR) and determine whether the smart money was really smart about this stock.
Is MicroStrategy Incorporated (NASDAQ:MSTR) ready to rally soon? Investors who are in the know were betting on the stock. The number of long hedge fund positions rose by 8 in recent months. MicroStrategy Incorporated (NASDAQ:MSTR) was in 26 hedge funds’ portfolios at the end of June. The all time high for this statistics is 28. Our calculations also showed that MSTR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 18 hedge funds in our database with MSTR holdings at the end of March.
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to take a peek at the recent hedge fund action surrounding MicroStrategy Incorporated (NASDAQ:MSTR).
How have hedgies been trading MicroStrategy Incorporated (NASDAQ:MSTR)?
At the end of June, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the first quarter of 2020. By comparison, 17 hedge funds held shares or bullish call options in MSTR a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of MicroStrategy Incorporated (NASDAQ:MSTR), with a stake worth $14.7 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $11.2 million. Clearline Capital, Winton Capital Management, 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 Clearline Capital allocated the biggest weight to MicroStrategy Incorporated (NASDAQ:MSTR), around 2.81% of its 13F portfolio. AWH Capital is also relatively very bullish on the stock, dishing out 1.59 percent of its 13F equity portfolio to MSTR.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. GLG Partners, managed by Noam Gottesman, established the most outsized position in MicroStrategy Incorporated (NASDAQ:MSTR). GLG Partners had $3.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $2.4 million position during the quarter. The following funds were also among the new MSTR investors: Michael Gelband’s ExodusPoint Capital, Mika Toikka’s AlphaCrest Capital Management, and Austin Wiggins Hopper’s AWH Capital.
Let’s check out hedge fund activity in other stocks similar to MicroStrategy Incorporated (NASDAQ:MSTR). These stocks are Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT), Kaman Corporation (NYSE:KAMN), Aphria Inc. (NYSE:APHA), Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), CryoPort, Inc. (NASDAQ:CYRX), Park National Corporation (NYSE:PRK), and Overstock.com, Inc. (NASDAQ:OSTK). All of these stocks’ market caps match MSTR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $172 million. That figure was $75 million in MSTR’s case. Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) is the most popular stock in this table. On the other hand Aphria Inc. (NYSE:APHA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks MicroStrategy Incorporated (NASDAQ:MSTR) is more popular among hedge funds. Our overall hedge fund sentiment score for MSTR is 87.9. 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 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 21.3% in 2020 through September 25th but still managed to beat the market by 17.7 percentage points. Hedge funds were also right about betting on MSTR as the stock returned 23.5% since the end of June 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.