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Hedge Funds Have Never Been This Bullish On Cloudera, Inc. (CLDR)

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Cloudera, Inc. (NYSE:CLDR) to find out whether it was one of their high conviction long-term ideas.

Cloudera, Inc. (NYSE:CLDR) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that CLDR isn’t among the 30 most popular stocks among hedge funds.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

William Martin Raging Capital Management

We’re going to take a peek at the fresh hedge fund action surrounding Cloudera, Inc. (NYSE:CLDR).

How have hedgies been trading Cloudera, Inc. (NYSE:CLDR)?

At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in CLDR 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.

CLDR_jun2019

According to Insider Monkey’s hedge fund database, RGM Capital, managed by Robert G. Moses, holds the biggest position in Cloudera, Inc. (NYSE:CLDR). RGM Capital has a $62.8 million position in the stock, comprising 4.3% of its 13F portfolio. On RGM Capital’s heels is Jim Simons of Renaissance Technologies, with a $41.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that are bullish consist of Derek C. Schrier’s Indaba Capital Management, Mariko Gordon’s Daruma Asset Management and William C. Martin’s Raging Capital Management.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. RGM Capital, managed by Robert G. Moses, established the most valuable position in Cloudera, Inc. (NYSE:CLDR). RGM Capital had $62.8 million invested in the company at the end of the quarter. Derek C. Schrier’s Indaba Capital Management also made a $31.6 million investment in the stock during the quarter. The other funds with new positions in the stock are David Gallo’s Valinor Management, Douglas T. Granat’s Trigran Investments, and George McCabe’s Portolan Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cloudera, Inc. (NYSE:CLDR) but similarly valued. We will take a look at Strayer Education Inc (NASDAQ:STRA), Old National Bancorp (NASDAQ:ONB), TerraForm Power Inc (NASDAQ:TERP), and AmeriGas Partners, L.P. (NYSE:APU). This group of stocks’ market values are similar to CLDR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STRA 13 214977 1
ONB 9 34803 2
TERP 11 221131 3
APU 6 9263 2
Average 9.75 120044 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $120 million. That figure was $345 million in CLDR’s case. Strayer Education Inc (NASDAQ:STRA) is the most popular stock in this table. On the other hand AmeriGas Partners, L.P. (NYSE:APU) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Cloudera, Inc. (NYSE:CLDR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CLDR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CLDR were disappointed as the stock returned -14.7% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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

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