With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Snowflake Inc (NYSE:SNOW).
Is Snowflake (SNOW) a good stock to buy now? The smart money was getting more optimistic. The number of bullish hedge fund bets inched up by 59 in recent months. Snowflake Inc (NYSE:SNOW) was in 59 hedge funds’ portfolios at the end of September. Our calculations also showed that SNOW isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s view the new hedge fund action encompassing Snowflake Inc (NYSE:SNOW).
How have hedgies been trading Snowflake Inc (NYSE:SNOW)?
At the end of the third quarter, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 59 from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in SNOW a year ago. 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, Berkshire Hathaway held the most valuable stake in Snowflake Inc (NYSE:SNOW), which was worth $1537.5 million at the end of the third quarter. On the second spot was Coatue Management which amassed $1015.1 million worth of shares. Tiger Global Management LLC, Citadel Investment Group, and D1 Capital Partners 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 3G Capital allocated the biggest weight to Snowflake Inc (NYSE:SNOW), around 9.6% of its 13F portfolio. Coatue Management is also relatively very bullish on the stock, designating 5.33 percent of its 13F equity portfolio to SNOW.
Consequently, specific money managers have been driving this bullishness. Berkshire Hathaway, managed by Warren Buffett, established the largest position in Snowflake Inc (NYSE:SNOW). Berkshire Hathaway had $1.5375 billion invested in the company at the end of the quarter. Philippe Laffont’s Coatue Management also initiated a $1.0151 billion position during the quarter. The other funds with brand new SNOW positions are Chase Coleman’s Tiger Global Management LLC, Ken Griffin’s Citadel Investment Group, and Daniel Sundheim’s D1 Capital Partners.
Let’s check out hedge fund activity in other stocks similar to Snowflake Inc (NYSE:SNOW). These stocks are Booking Holdings Inc. (NASDAQ:BKNG), Crown Castle International Corp. (NYSE:CCI), Deere & Company (NYSE:DE), Goldman Sachs Group, Inc. (NYSE:GS), Fiserv, Inc. (NASDAQ:FISV), Anthem Inc (NYSE:ANTM), and Becton, Dickinson and Company (NYSE:BDX). All of these stocks’ market caps resemble SNOW’s market cap.
|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 69.1 hedge funds with bullish positions and the average amount invested in these stocks was $3656 million. That figure was $4614 million in SNOW’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Crown Castle International Corp. (NYSE:CCI) is the least popular one with only 42 bullish hedge fund positions. Snowflake Inc (NYSE:SNOW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SNOW is 29.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on SNOW as the stock returned 16.6% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.