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Is Check Point Software Technologies Ltd. (CHKP) A Good Stock To Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Hedge fund interest in Check Point Software Technologies Ltd. (NASDAQ:CHKP) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CHKP to other stocks including Kellogg Company (NYSE:K), Shinhan Financial Group Co., Ltd. (NYSE:SHG), and Vulcan Materials Company (NYSE:VMC) to get a better sense of its popularity. Our calculations also showed that CHKP isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are perceived as slow, outdated financial tools of years past. While there are more than 8000 funds with their doors open at present, Our experts hone in on the crème de la crème of this club, about 750 funds. These investment experts preside over the majority of all hedge funds’ total capital, and by keeping track of their top equity investments, Insider Monkey has uncovered numerous investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Clint Carlson, Carlson Capital

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the recent hedge fund action regarding Check Point Software Technologies Ltd. (NASDAQ:CHKP).

Hedge fund activity in Check Point Software Technologies Ltd. (NASDAQ:CHKP)

At the end of the second quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in CHKP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CHKP_oct2019

The largest stake in Check Point Software Technologies Ltd. (NASDAQ:CHKP) was held by Arrowstreet Capital, which reported holding $274.2 million worth of stock at the end of March. It was followed by Alyeska Investment Group with a $111.8 million position. Other investors bullish on the company included Carlson Capital, GLG Partners, and Two Sigma Advisors.

Judging by the fact that Check Point Software Technologies Ltd. (NASDAQ:CHKP) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that slashed their positions entirely last quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest position of all the hedgies monitored by Insider Monkey, valued at about $22.3 million in stock. Tor Minesuk’s fund, Mondrian Capital, also cut its stock, about $3.5 million worth. These transactions are intriguing to say the least, 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 similar to Check Point Software Technologies Ltd. (NASDAQ:CHKP). These stocks are Kellogg Company (NYSE:K), Shinhan Financial Group Co., Ltd. (NYSE:SHG), Vulcan Materials Company (NYSE:VMC), and AmerisourceBergen Corporation (NYSE:ABC). This group of stocks’ market valuations are similar to CHKP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
K 28 528857 2
SHG 5 7950 1
VMC 52 2028909 4
ABC 36 624583 8
Average 30.25 797575 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $798 million. That figure was $667 million in CHKP’s case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 5 bullish hedge fund positions. Check Point Software Technologies Ltd. (NASDAQ:CHKP) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CHKP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CHKP investors were disappointed as the stock returned -5.3% during the third quarter and underperformed 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 many of these stocks already outperformed the market so far in 2019.

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

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