We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Atlassian Corporation Plc (NASDAQ:TEAM) and determine whether hedge funds skillfully traded this stock.
Is Atlassian Corporation Plc (NASDAQ:TEAM) going to take off soon? Prominent investors were turning less bullish. The number of bullish hedge fund bets shrunk by 4 lately. Atlassian Corporation Plc (NASDAQ:TEAM) was in 55 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 62. Our calculations also showed that TEAM 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).
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 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 58 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. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s view the key hedge fund action encompassing Atlassian Corporation Plc (NASDAQ:TEAM).
What does smart money think about Atlassian Corporation Plc (NASDAQ:TEAM)?
Heading into the third quarter of 2020, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 36 hedge funds with a bullish position in TEAM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Atlassian Corporation Plc (NASDAQ:TEAM), which was worth $1232.1 million at the end of the third quarter. On the second spot was Tiger Global Management LLC which amassed $272.2 million worth of shares. Foxhaven Asset Management, D E Shaw, and GQG 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 Strategy Capital allocated the biggest weight to Atlassian Corporation Plc (NASDAQ:TEAM), around 15.4% of its 13F portfolio. Center Lake Capital is also relatively very bullish on the stock, designating 7.94 percent of its 13F equity portfolio to TEAM.
Since Atlassian Corporation Plc (NASDAQ:TEAM) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedge funds who were dropping their entire stakes in the second quarter. Intriguingly, Lone Pine Capital dropped the biggest stake of all the hedgies monitored by Insider Monkey, worth an estimated $190.6 million in stock. Scott Bessent’s fund, Key Square Capital Management, also dropped its stock, about $29.7 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds in the second quarter.
Let’s check out hedge fund activity in other stocks similar to Atlassian Corporation Plc (NASDAQ:TEAM). These stocks are Honda Motor Co Ltd (NYSE:HMC), Workday Inc (NASDAQ:WDAY), Edwards Lifesciences Corporation (NYSE:EW), Baxter International Inc. (NYSE:BAX), Itau Unibanco Holding SA (NYSE:ITUB), Biogen Inc. (NASDAQ:BIIB), and The Charles Schwab Corporation (NYSE:SCHW). This group of stocks’ market caps match TEAM’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 48.7 hedge funds with bullish positions and the average amount invested in these stocks was $2090 million. That figure was $2873 million in TEAM’s case. Workday Inc (NASDAQ:WDAY) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 10 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 63.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately TEAM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TEAM were disappointed as the stock returned -6.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.