How Did Cloudera, Inc. (CLDR) Compare Against Top Hedge Fund Stocks in 2019?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned 31.2% in 2019. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Cloudera, Inc. (NYSE:CLDR).

Is Cloudera, Inc. (NYSE:CLDR) ready to rally soon? Hedge funds are betting on the stock. The number of long hedge fund positions inched up by 1 in recent months. Our calculations also showed that CLDR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). CLDR was in 26 hedge funds’ portfolios at the end of the third quarter of 2019. There were 25 hedge funds in our database with CLDR holdings at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Carl Icahn - Icahn Capital Lp

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let’s check out the key hedge fund action encompassing Cloudera, Inc. (NYSE:CLDR).

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

At Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the second quarter of 2019. On the other hand, there were a total of 25 hedge funds with a bullish position in CLDR a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is CLDR A Good Stock To Buy?

Among these funds, Icahn Capital held the most valuable stake in Cloudera, Inc. (NYSE:CLDR), which was worth $485.5 million at the end of the third quarter. On the second spot was RGM Capital which amassed $61.9 million worth of shares. Raging Capital Management, Citadel Investment Group, and Intrinsic Edge Capital 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 Raging Capital Management allocated the biggest weight to Cloudera, Inc. (NYSE:CLDR), around 6.69% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, setting aside 4.12 percent of its 13F equity portfolio to CLDR.

As one would reasonably expect, specific money managers were breaking ground themselves. Icahn Capital, managed by Carl Icahn, established the biggest position in Cloudera, Inc. (NYSE:CLDR). Icahn Capital had $485.5 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also made a $10.5 million investment in the stock during the quarter. The following funds were also among the new CLDR investors: Chuck Royce’s Royce & Associates, Brandon Haley’s Holocene Advisors, and David E. Shaw’s D E Shaw.

Let’s now take a look at hedge fund activity in other stocks similar to Cloudera, Inc. (NYSE:CLDR). These stocks are Columbia Property Trust Inc (NYSE:CXP), CNO Financial Group Inc (NYSE:CNO), Integer Holdings Corporation (NYSE:ITGR), and Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). This group of stocks’ market values resemble CLDR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CXP 14 69448 2
CNO 16 194919 2
ITGR 16 173882 -2
RARE 18 186654 2
Average 16 156226 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $653 million in CLDR’s case. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) is the most popular stock in this table. On the other hand Columbia Property Trust Inc (NYSE:CXP) is the least popular one with only 14 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 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 5.2% in 2019 and trailed 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 65 percent of these stocks outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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