Here is What Hedge Funds Think About Chegg Inc (CHGG)

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on Chegg Inc (NYSE:CHGG).

Chegg Inc (NYSE:CHGG) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 33 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that CHGG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare CHGG to other stocks including Annaly Capital Management, Inc. (NYSE:NLY), Advance Auto Parts, Inc. (NYSE:AAP), and AMERCO (NASDAQ:UHAL) to get a better sense of its popularity.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to review the key hedge fund action encompassing Chegg Inc (NYSE:CHGG).

Do Hedge Funds Think CHGG Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 34 hedge funds with a bullish position in CHGG a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

More specifically, Sylebra Capital Management was the largest shareholder of Chegg Inc (NYSE:CHGG), with a stake worth $140.8 million reported as of the end of March. Trailing Sylebra Capital Management was Citadel Investment Group, which amassed a stake valued at $132.9 million. Zevenbergen Capital Investments, Polar Capital, and Two Sigma Advisors 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 Selkirk Management allocated the biggest weight to Chegg Inc (NYSE:CHGG), around 8.23% of its 13F portfolio. Stony Point Capital is also relatively very bullish on the stock, designating 6.69 percent of its 13F equity portfolio to CHGG.

Due to the fact that Chegg Inc (NYSE:CHGG) has experienced declining sentiment from hedge fund managers, we can see that there were a few hedge funds who were dropping their entire stakes in the first quarter. It’s worth mentioning that Noam Gottesman’s GLG Partners dumped the largest investment of the 750 funds tracked by Insider Monkey, comprising an estimated $63 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $32.1 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Chegg Inc (NYSE:CHGG) but similarly valued. These stocks are Annaly Capital Management, Inc. (NYSE:NLY), Advance Auto Parts, Inc. (NYSE:AAP), AMERCO (NASDAQ:UHAL), Darling Ingredients Inc. (NYSE:DAR), Cree, Inc. (NASDAQ:CREE), The Mosaic Company (NYSE:MOS), and Holdings, Inc. (NYSE:BILL). This group of stocks’ market caps resemble CHGG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NLY 15 140155 -6
AAP 43 1284543 7
UHAL 23 661125 2
DAR 33 756667 -3
CREE 30 605496 -3
MOS 38 944874 -1
BILL 51 2411036 -1
Average 33.3 971985 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.3 hedge funds with bullish positions and the average amount invested in these stocks was $972 million. That figure was $672 million in CHGG’s case. Holdings, Inc. (NYSE:BILL) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 15 bullish hedge fund positions. Chegg Inc (NYSE:CHGG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHGG is 52. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately CHGG wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CHGG investors were disappointed as the stock returned -1.7% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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