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Is Cornerstone OnDemand, Inc. (CSOD) A Good Stock To Buy?

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Cornerstone OnDemand, Inc. (NASDAQ:CSOD) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Cornerstone OnDemand, Inc. (NASDAQ:CSOD) an attractive investment today? Investors who are in the know are becoming less confident. The number of bullish hedge fund positions were trimmed by 2 lately. Our calculations also showed that csod isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Griffin CITADEL INVESTMENT GROUP

Let’s take a glance at the fresh hedge fund action encompassing Cornerstone OnDemand, Inc. (NASDAQ:CSOD).

How have hedgies been trading Cornerstone OnDemand, Inc. (NASDAQ:CSOD)?

At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in CSOD a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

No of Hedge Funds with CSOD Positions

The largest stake in Cornerstone OnDemand, Inc. (NASDAQ:CSOD) was held by Praesidium Investment Management Company, which reported holding $179.3 million worth of stock at the end of March. It was followed by RGM Capital with a $97.6 million position. Other investors bullish on the company included Citadel Investment Group, Tensile Capital, and Renaissance Technologies.

Seeing as Cornerstone OnDemand, Inc. (NASDAQ:CSOD) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there exists a select few hedgies that decided to sell off their entire stakes heading into Q3. Interestingly, Bruce Garelick’s Garelick Capital Partners dumped the largest investment of the 700 funds watched by Insider Monkey, totaling an estimated $16.6 million in stock, and Gil Simon’s SoMa Equity Partners was right behind this move, as the fund dropped about $15.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to Cornerstone OnDemand, Inc. (NASDAQ:CSOD). We will take a look at Taubman Centers, Inc. (NYSE:TCO), Qualys Inc (NASDAQ:QLYS), Allegheny Technologies Incorporated (NYSE:ATI), and AutoNation, Inc. (NYSE:AN). This group of stocks’ market caps are similar to CSOD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TCO 14 205038 -6
QLYS 14 144956 -3
ATI 25 209165 1
AN 21 458504 -1
Average 18.5 254416 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $254 million. That figure was $645 million in CSOD’s case. Allegheny Technologies Incorporated (NYSE:ATI) is the most popular stock in this table. On the other hand Taubman Centers, Inc. (NYSE:TCO) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CSOD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CSOD were disappointed as the stock returned -1.3% during the same period 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 13 of these stocks already outperformed the market in Q2.

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

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