The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded SAP SE (NYSE:SAP) based on those filings.
SAP SE (NYSE:SAP) has experienced a decrease in support from the world’s most elite money managers lately. SAP was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. There were 16 hedge funds in our database with SAP positions at the end of the previous quarter. Our calculations also showed that SAP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 largest producers of bauxite to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a gander at the new hedge fund action surrounding SAP SE (NYSE:SAP).
Hedge fund activity in SAP SE (NYSE:SAP)
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SAP over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in SAP SE (NYSE:SAP), which was worth $854 million at the end of the third quarter. On the second spot was GQG Partners which amassed $359.3 million worth of shares. Arrowstreet Capital, Renaissance Technologies, and Holocene Advisors 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 Unio Capital allocated the biggest weight to SAP SE (NYSE:SAP), around 5.34% of its 13F portfolio. GQG Partners is also relatively very bullish on the stock, earmarking 2.47 percent of its 13F equity portfolio to SAP.
Due to the fact that SAP SE (NYSE:SAP) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of hedgies that slashed their positions entirely in the first quarter. At the top of the heap, Paul Singer’s Elliott Management dumped the biggest stake of the 750 funds tracked by Insider Monkey, worth close to $100.5 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund cut about $10.1 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds in the first quarter.
Let’s check out hedge fund activity in other stocks similar to SAP SE (NYSE:SAP). These stocks are NIKE, Inc. (NYSE:NKE), salesforce.com, inc. (NYSE:CRM), Bristol Myers Squibb Company (NYSE:BMY), and Costco Wholesale Corporation (NASDAQ:COST). This group of stocks’ market valuations are closest to SAP’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 97.75 hedge funds with bullish positions and the average amount invested in these stocks was $5134 million. That figure was $1386 million in SAP’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Costco Wholesale Corporation (NASDAQ:COST) is the least popular one with only 68 bullish hedge fund positions. Compared to these stocks SAP SE (NYSE:SAP) is even less popular than COST. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on SAP, though not to the same extent, as the stock returned 26.4% during the second quarter (through June 25th) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.