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Here is What Hedge Funds Think About Elastic N.V. (ESTC)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of Elastic N.V. (NYSE:ESTC).

Elastic N.V. (NYSE:ESTC) has experienced a decrease in support from the world’s most elite money managers lately. ESTC was in 33 hedge funds’ portfolios at the end of March. There were 39 hedge funds in our database with ESTC positions at the end of the previous quarter. Our calculations also showed that ESTC 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).

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

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 S&P 500 ETFs by 51 percentage points since March 2017 (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.

Chase Coleman of Tiger Global

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 let’s take a look at the key hedge fund action encompassing Elastic N.V. (NYSE:ESTC).

How have hedgies been trading Elastic N.V. (NYSE:ESTC)?

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ESTC over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, Sylebra Capital Management held the most valuable stake in Elastic N.V. (NYSE:ESTC), which was worth $322.8 million at the end of the third quarter. On the second spot was Tiger Global Management LLC which amassed $224.3 million worth of shares. Valinor Management LLC, Black-and-White Capital, and Alkeon 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 Sylebra Capital Management allocated the biggest weight to Elastic N.V. (NYSE:ESTC), around 13.22% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, earmarking 7.86 percent of its 13F equity portfolio to ESTC.

Due to the fact that Elastic N.V. (NYSE:ESTC) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there exists a select few funds that elected to cut their positions entirely by the end of the third quarter. Interestingly, Anand Parekh’s Alyeska Investment Group cut the biggest position of the 750 funds watched by Insider Monkey, comprising about $52.9 million in stock, and Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital was right behind this move, as the fund sold off about $14.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 6 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Elastic N.V. (NYSE:ESTC). These stocks are WEX Inc (NYSE:WEX), Momo Inc (NASDAQ:MOMO), Pilgrim’s Pride Corporation (NASDAQ:PPC), and Woori Financial Group Inc. (NYSE:WF). This group of stocks’ market caps are similar to ESTC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WEX 35 354821 10
MOMO 25 585481 -13
PPC 18 122135 -6
WF 3 2382 0
Average 20.25 266205 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $835 million in ESTC’s case. WEX Inc (NYSE:WEX) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 3 bullish hedge fund positions. Elastic N.V. (NYSE:ESTC) is not the most popular stock in this group but hedge fund interest is still above 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 but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on ESTC as the stock returned 54% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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