Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is salesforce.com, inc. (NYSE:CRM) ready to rally soon? The smart money is taking a bearish view. The number of long hedge fund positions dropped by 12 in recent months. CRM was in 56 hedge funds’ portfolios at the end of the third quarter of 2015. There were 68 hedge funds in our database with CRM positions at the end of the previous quarter. At the end of this article we will also compare CRM to other stocks, including PNC Financial Services (NYSE:PNC), Canadian National Railway (USA) (NYSE:CNI), and General Dynamics Corporation (NYSE:GD) to get a better sense of its popularity.
If you’d ask most stock holders, hedge funds are perceived as underperforming, outdated investment vehicles of years past. While there are over an 8000 funds with their doors open at the moment, We hone in on the top tier of this club, around 700 funds. These investment experts shepherd the lion’s share of the hedge fund industry’s total asset base, and by paying attention to their top equity investments, Insider Monkey has revealed many investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Now, let’s take a peek at the latest action surrounding salesforce.com, inc. (NYSE:CRM).
Hedge fund activity in salesforce.com, inc. (NYSE:CRM)
At Q3’s end, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in salesforce.com, inc. (NYSE:CRM). Citadel Investment Group has a $360 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Christopher Lord’s Criterion Capital, with a $189.1 million position; 6.4% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish consist of James Dondero’s Highland Capital Management, Dmitry Balyasny’s Balyasny Asset Management and Frank Slattery’s Symmetry Peak Management.
Because salesforce.com, inc. (NYSE:CRM) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few funds that slashed their positions entirely by the end of the third quarter. Intriguingly, Bain Capital’s Brookside Capital dropped the biggest investment of all the hedgies followed by Insider Monkey, totaling close to $71.1 million in stock. Philippe Laffont’s fund, Coatue Management, also cut its holding, about $38.8 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 12 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as salesforce.com, inc. (NYSE:CRM) but similarly valued. We will take a look at PNC Financial Services (NYSE:PNC), Canadian National Railway (USA) (NYSE:CNI), General Dynamics Corporation (NYSE:GD), and NextEra Energy, Inc. (NYSE:NEE). All of these stocks’ market caps resemble CRM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $2.62 billion, compared to $1.65 billion in CRM’s case. General Dynamics Corporation (NYSE:GD) is the most popular stock in this table. On the other hand Canadian National Railway (USA) (NYSE:CNI) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks salesforce.com, inc. (NYSE:CRM) 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.