Hedge Funds Are Selling Medallia, Inc. (MDLA)

In this article we will analyze whether Medallia, Inc. (NYSE:MDLA) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Medallia, Inc. (NYSE:MDLA) was in 19 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 24. MDLA has seen a decrease in hedge fund sentiment in recent months. There were 21 hedge funds in our database with MDLA holdings at the end of December. Our calculations also showed that MDLA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Kerr Neilson of Platinum Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Now we’re going to review the new hedge fund action encompassing Medallia, Inc. (NYSE:MDLA).

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

At first quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in MDLA a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MDLA A Good Stock To Buy?

Among these funds, SCGE Management held the most valuable stake in Medallia, Inc. (NYSE:MDLA), which was worth $114.3 million at the end of the fourth quarter. On the second spot was Greenvale Capital which amassed $50.2 million worth of shares. Platinum Asset Management, Millennium Management, and Vista Equity Partners 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 Greenvale Capital allocated the biggest weight to Medallia, Inc. (NYSE:MDLA), around 5.46% of its 13F portfolio. Washington Harbour Partners is also relatively very bullish on the stock, earmarking 1.68 percent of its 13F equity portfolio to MDLA.

Since Medallia, Inc. (NYSE:MDLA) has witnessed a decline in interest from hedge fund managers, we can see that there were a few funds that elected to cut their entire stakes last quarter. At the top of the heap, Brian Ashford-Russell and Tim Woolley’s Polar Capital dropped the biggest investment of the 750 funds watched by Insider Monkey, comprising close to $54.5 million in stock, and Matthew Halbower’s Pentwater Capital Management was right behind this move, as the fund cut about $1.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Medallia, Inc. (NYSE:MDLA). These stocks are Canada Goose Holdings Inc. (NYSE:GOOS), Madison Square Garden Sports Corp. (NYSE:MSGS), Avient Corporation (NYSE:AVNT), Wintrust Financial Corporation (NASDAQ:WTFC), Innovative Industrial Properties, Inc. (NYSE:IIPR), Antero Midstream Corp (NYSE:AM), and Armstrong World Industries, Inc. (NYSE:AWI). This group of stocks’ market valuations are similar to MDLA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GOOS 19 207847 0
MSGS 47 934404 3
AVNT 24 232031 7
WTFC 19 176919 0
IIPR 13 192649 -10
AM 17 123037 -2
AWI 25 511972 -6
Average 23.4 339837 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $340 million. That figure was $296 million in MDLA’s case. Madison Square Garden Sports Corp. (NYSE:MSGS) is the most popular stock in this table. On the other hand Innovative Industrial Properties, Inc. (NYSE:IIPR) is the least popular one with only 13 bullish hedge fund positions. Medallia, Inc. (NYSE:MDLA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MDLA is 35.6. 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 23.8% in 2021 through July 16th and beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on MDLA, though not to the same extent, as the stock returned 10.2% since the end of Q1 (through July 16th) and outperformed the market.

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