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Hedge Funds Have Never Been This Bullish On salesforce.com, inc. (CRM)

We can judge whether salesforce.com, inc. (NYSE:CRM) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. We know coronavirus is probably the #1 concern in your mind right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is actually a 3.3% probability that president Donald Trump will die from the new coronavirus (see the details). Coronavirus will probably cause a short recession and then things will get back to business as usual. That’s why we believe you should use this opportunity to identify the best stocks to invest for the future and add them to your portfolio at increasingly attractive prices. We track hedge funds’ moves to find high quality stocks. 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 when we factor in known risk factors.

salesforce.com, inc. (NYSE:CRM) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. CRM was in 112 hedge funds’ portfolios at the end of December. There were 109 hedge funds in our database with CRM positions at the end of the previous quarter. Our calculations also showed that CRM ranks 15th among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are perceived as unimportant, old investment vehicles of yesteryear. While there are more than 8000 funds with their doors open today, Our researchers look at the leaders of this group, about 850 funds. It is estimated that this group of investors have their hands on most of all hedge funds’ total capital, and by watching their matchless stock picks, Insider Monkey has identified several investment strategies that have historically outrun 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 per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Andreas Halvorsen

Andreas Halvorsen of Viking Global

We leave no stone unturned when looking for the next great investment idea. For example this gold mining company is acquiring gold mines in Americas at a fraction of the cost of drilling them, so we look into its viability. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned nearly 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing salesforce.com, inc. (NYSE:CRM).

How are hedge funds trading salesforce.com, inc. (NYSE:CRM)?

Heading into the first quarter of 2020, a total of 112 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. By comparison, 99 hedge funds held shares or bullish call options in CRM a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the number one position in salesforce.com, inc. (NYSE:CRM), worth close to $1.1819 billion, accounting for 1.2% of its total 13F portfolio. The second most bullish fund manager is Matrix Capital Management, led by David Goel and Paul Ferri, holding a $816.3 million position; the fund has 17.4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions contain Andreas Halvorsen’s Viking Global, Lone Pine Capital and Brad Gerstner’s Altimeter Capital Management. In terms of the portfolio weights assigned to each position Matrix Capital Management allocated the biggest weight to salesforce.com, inc. (NYSE:CRM), around 17.38% of its 13F portfolio. HMI Capital is also relatively very bullish on the stock, dishing out 16.9 percent of its 13F equity portfolio to CRM.

As aggregate interest increased, key money managers were leading the bulls’ herd. Farallon Capital, founded by Thomas Steyer, established the most valuable position in salesforce.com, inc. (NYSE:CRM). Farallon Capital had $280.5 million invested in the company at the end of the quarter. Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management also initiated a $152.6 million position during the quarter. The following funds were also among the new CRM investors: Daniel S. Och’s OZ Management, Doug Silverman and Alexander Klabin’s Senator Investment Group, and Christopher R. Hansen’s Valiant Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as salesforce.com, inc. (NYSE:CRM) but similarly valued. These stocks are NVIDIA Corporation (NASDAQ:NVDA), Amgen, Inc. (NASDAQ:AMGN), TOTAL S.A. (NYSE:TOT), and Netflix, Inc. (NASDAQ:NFLX). This group of stocks’ market valuations resemble CRM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVDA 79 3179400 23
AMGN 58 2290267 3
TOT 17 1195776 -1
NFLX 114 13080883 11
Average 67 4936582 9

View table here if you experience formatting issues.

As you can see these stocks had an average of 67 hedge funds with bullish positions and the average amount invested in these stocks was $4937 million. That figure was $9799 million in CRM’s case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand TOTAL S.A. (NYSE:TOT) is the least popular one with only 17 bullish hedge fund positions. salesforce.com, inc. (NYSE:CRM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Hedge funds were also right about betting on CRM as the stock returned 8.7% during the first quarter (through March 2nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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