Hedge Funds Are Selling Atlassian Corporation Plc (TEAM)

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Atlassian Corporation Plc (NASDAQ:TEAM).

Is Atlassian Corporation Plc (NASDAQ:TEAM) a safe stock to buy now? Money managers were cutting their exposure. The number of long hedge fund bets were cut by 3 recently. Atlassian Corporation Plc (NASDAQ:TEAM) was in 64 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 69. Our calculations also showed that TEAM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. Keeping this in mind let’s take a look at the new hedge fund action surrounding Atlassian Corporation Plc (NASDAQ:TEAM).

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

Heading into the third quarter of 2021, a total of 64 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. By comparison, 55 hedge funds held shares or bullish call options in TEAM a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in Atlassian Corporation Plc (NASDAQ:TEAM) was held by Renaissance Technologies, which reported holding $845.9 million worth of stock at the end of June. It was followed by Tiger Global Management LLC with a $633.3 million position. Other investors bullish on the company included Melvin Capital Management, Foxhaven Asset Management, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Strategy Capital allocated the biggest weight to Atlassian Corporation Plc (NASDAQ:TEAM), around 13.39% of its 13F portfolio. One01 Capital is also relatively very bullish on the stock, dishing out 8.44 percent of its 13F equity portfolio to TEAM.

Since Atlassian Corporation Plc (NASDAQ:TEAM) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there were a few fund managers that decided to sell off their positions entirely last quarter. Intriguingly, Lone Pine Capital cut the biggest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $626.9 million in stock, and Catherine D. Wood’s ARK Investment Management was right behind this move, as the fund sold off about $60.1 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Atlassian Corporation Plc (NASDAQ:TEAM) but similarly valued. We will take a look at Autodesk, Inc. (NASDAQ:ADSK), The Southern Company (NYSE:SO), Air Products & Chemicals, Inc. (NYSE:APD), Analog Devices, Inc. (NASDAQ:ADI), Stellantis N.V. (NYSE:STLA), Banco Santander (Brasil) SA (NYSE:BSBR), and Roku, Inc. (NASDAQ:ROKU). This group of stocks’ market valuations match TEAM’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.7 hedge funds with bullish positions and the average amount invested in these stocks was $2364 million. That figure was $4170 million in TEAM’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 7 bullish hedge fund positions. Atlassian Corporation Plc (NASDAQ:TEAM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TEAM is 79.8. 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. 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 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. Hedge funds were also right about betting on TEAM as the stock returned 52.6% since the end of Q2 (through 9/27) 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.

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