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Hedge Funds Don’t Like Check Point Software Technologies Ltd. (CHKP) Much

The latest 13F reporting period has come and gone, and 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. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Check Point Software Technologies Ltd. (NASDAQ:CHKP) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Check Point Software Technologies Ltd. (NASDAQ:CHKP) investors should pay attention to a decrease in support from the world’s most elite money managers recently. Check Point Software Technologies Ltd. (NASDAQ:CHKP) was in 28 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 35. Our calculations also showed that CHKP 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.

To the average investor there are tons of gauges stock traders use to assess stocks. A pair of the less utilized gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outperform the broader indices by a solid margin (see the details here).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

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. With all of this in mind we’re going to view the recent hedge fund action surrounding Check Point Software Technologies Ltd. (NASDAQ:CHKP).

How are hedge funds trading Check Point Software Technologies Ltd. (NASDAQ:CHKP)?

At the end of June, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in CHKP a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

The largest stake in Check Point Software Technologies Ltd. (NASDAQ:CHKP) was held by Ako Capital, which reported holding $185.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $136 million position. Other investors bullish on the company included Renaissance Technologies, D E Shaw, and GLG Partners. In terms of the portfolio weights assigned to each position Ako Capital allocated the biggest weight to Check Point Software Technologies Ltd. (NASDAQ:CHKP), around 3.24% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, designating 1.99 percent of its 13F equity portfolio to CHKP.

Seeing as Check Point Software Technologies Ltd. (NASDAQ:CHKP) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds that elected to cut their entire stakes heading into Q3. At the top of the heap, Tsachy Mishal’s TAM Capital Management sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $23.8 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund cut about $10 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Check Point Software Technologies Ltd. (NASDAQ:CHKP) but similarly valued. These stocks are Discover Financial Services (NYSE:DFS), Vulcan Materials Company (NYSE:VMC), Telefonica Brasil SA (NYSE:VIV), Quest Diagnostics Incorporated (NYSE:DGX), Cardinal Health, Inc. (NYSE:CAH), Tractor Supply Company (NASDAQ:TSCO), and CBRE Group, Inc. (NYSE:CBRE). This group of stocks’ market valuations are closest to CHKP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DFS 44 740724 4
VMC 51 879902 2
VIV 12 99788 4
DGX 46 804000 8
CAH 49 956785 5
TSCO 38 828499 1
CBRE 29 1442786 -4
Average 38.4 821783 2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.4 hedge funds with bullish positions and the average amount invested in these stocks was $822 million. That figure was $725 million in CHKP’s case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 12 bullish hedge fund positions. Check Point Software Technologies Ltd. (NASDAQ:CHKP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHKP is 48.5. 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 gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on CHKP as the stock returned 11.9% since the end of June (through September 25th) and outperformed the market by an even larger margin.

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