Is Guidewire Software Inc (GWRE) Going to Burn These Hedge Funds?

Is Guidewire Software Inc (NYSE:GWRE) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Guidewire Software Inc (NYSE:GWRE) has experienced an increase in support from the world’s most elite money managers of late. GWRE was in 32 hedge funds’ portfolios at the end of the third quarter of 2018. There were 18 hedge funds in our database with GWRE positions at the end of the previous quarter. Our calculations also showed that GWRE isn’t among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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.


We’re going to review the new hedge fund action regarding Guidewire Software Inc (NYSE:GWRE).

How are hedge funds trading Guidewire Software Inc (NYSE:GWRE)?

Heading into the fourth quarter of 2018, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 78% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GWRE over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Among these funds, Stockbridge Partners held the most valuable stake in Guidewire Software Inc (NYSE:GWRE), which was worth $89.2 million at the end of the third quarter. On the second spot was Point State Capital which amassed $82.1 million worth of shares. Moreover, Renaissance Technologies, Partner Fund Management, and Shannon River Fund Management were also bullish on Guidewire Software Inc (NYSE:GWRE), allocating a large percentage of their portfolios to this stock.

Consequently, key money managers have jumped into Guidewire Software Inc (NYSE:GWRE) headfirst. Point State Capital, managed by Zach Schreiber, assembled the biggest position in Guidewire Software Inc (NYSE:GWRE). Point State Capital had $82.1 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $47.1 million investment in the stock during the quarter. The other funds with brand new GWRE positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Greg Poole’s Echo Street Capital Management, and Eric Bannasch’s Cadian Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Guidewire Software Inc (NYSE:GWRE). These stocks are CDK Global Inc (NASDAQ:CDK), Aspen Technology, Inc. (NASDAQ:AZPN), Nordson Corporation (NASDAQ:NDSN), and Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT). This group of stocks’ market valuations are similar to GWRE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CDK 30 957372 1
AZPN 28 1199848 3
NDSN 16 54837 1
MBT 11 253236 -3
Average 21.25 616323 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $616 million. That figure was $465 million in GWRE’s case. CDK Global Inc (NASDAQ:CDK) is the most popular stock in this table. On the other hand Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Guidewire Software Inc (NYSE:GWRE) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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