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Hedge Funds Have Never Been This Bullish On Guidewire Software Inc (GWRE)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Guidewire Software Inc (NYSE:GWRE) based on that data.

Is Guidewire Software Inc (NYSE:GWRE) ready to rally soon? Hedge funds are becoming more confident. The number of long hedge fund positions moved up by 2 lately. Our calculations also showed that GWRE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). GWRE was in 34 hedge funds’ portfolios at the end of the first quarter of 2020. There were 32 hedge funds in our database with GWRE holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most investors, hedge funds are seen as unimportant, old financial tools of the past. While there are more than 8000 funds with their doors open at present, Our researchers choose to focus on the top tier of this group, approximately 850 funds. These money managers administer most of all hedge funds’ total capital, and by paying attention to their inimitable equity investments, Insider Monkey has unsheathed a few investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing Guidewire Software Inc (NYSE:GWRE).

How have hedgies been trading Guidewire Software Inc (NYSE:GWRE)?

Heading into the second quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 26 hedge funds with a bullish position in GWRE 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 adding to their stakes significantly (or already accumulated large positions).

Is GWRE A Good Stock To Buy?

Among these funds, Stockbridge Partners held the most valuable stake in Guidewire Software Inc (NYSE:GWRE), which was worth $323.6 million at the end of the third quarter. On the second spot was D1 Capital Partners which amassed $138.4 million worth of shares. Route One Investment Company, Skye Global Management, and Bares Capital Management 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 Stockbridge Partners allocated the biggest weight to Guidewire Software Inc (NYSE:GWRE), around 12.83% of its 13F portfolio. MIG Capital is also relatively very bullish on the stock, earmarking 4.19 percent of its 13F equity portfolio to GWRE.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Guidewire Software Inc (NYSE:GWRE) headfirst. Route One Investment Company, managed by William Duhamel, initiated the biggest position in Guidewire Software Inc (NYSE:GWRE). Route One Investment Company had $52.7 million invested in the company at the end of the quarter. Charles Pollnow’s Triple Frond Partners also made a $29.6 million investment in the stock during the quarter. The other funds with brand new GWRE positions are Quincy Lee’s Ancient Art (Teton Capital), Greg Poole’s Echo Street Capital Management, and Tom Gayner’s Markel Gayner Asset Management.

Let’s also examine hedge fund activity in other stocks similar to Guidewire Software Inc (NYSE:GWRE). These stocks are ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Perrigo Company (NASDAQ:PRGO), ABIOMED, Inc. (NASDAQ:ABMD), and Zynga Inc (NASDAQ:ZNGA). This group of stocks’ market values are closest to GWRE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACAD 28 2404189 -6
PRGO 28 463596 1
ABMD 27 522802 -8
ZNGA 59 1015313 11
Average 35.5 1101475 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $1101 million. That figure was $757 million in GWRE’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand ABIOMED, Inc. (NASDAQ:ABMD) is the least popular one with only 27 bullish hedge fund positions. Guidewire Software Inc (NYSE:GWRE) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on GWRE as the stock returned 29.3% during the second quarter and outperformed the market by an even larger margin.

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