Is Snowflake (SNOW) Stock A Buy or Sell?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million 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 December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Snowflake Inc (NYSE:SNOW) based on those filings.

Is SNOW stock a buy or sell? Snowflake Inc (NYSE:SNOW) was in 54 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 59. SNOW investors should be aware of a decrease in activity from the world’s largest hedge funds of late. There were 59 hedge funds in our database with SNOW positions at the end of the third quarter. Our calculations also showed that SNOW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here).

Brad Gerstner Altimeter Capital

Brad Gerstner of Altimeter Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. 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 homepage (or at the end of this article). Keeping this in mind let’s check out the latest hedge fund action surrounding Snowflake Inc (NYSE:SNOW).

Do Hedge Funds Think SNOW Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in SNOW over the last 22 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, Altimeter Capital Management held the most valuable stake in Snowflake Inc (NYSE:SNOW), which was worth $2670.9 million at the end of the fourth quarter. On the second spot was Berkshire Hathaway which amassed $1723.7 million worth of shares. Coatue Management, Tiger Global Management LLC, 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 Altimeter Capital Management allocated the biggest weight to Snowflake Inc (NYSE:SNOW), around 24.71% of its 13F portfolio. 3G Capital is also relatively very bullish on the stock, setting aside 9.45 percent of its 13F equity portfolio to SNOW.

Because Snowflake Inc (NYSE:SNOW) has witnessed falling interest from hedge fund managers, it’s easy to see that there were a few fund managers that decided to sell off their full holdings heading into Q1. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest investment of the 750 funds tracked by Insider Monkey, totaling an estimated $47.3 million in stock. Karthik Sarma’s fund, SRS Investment Management, also cut its stock, about $35.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds heading into Q1.

Let’s now take a look at hedge fund activity in other stocks similar to Snowflake Inc (NYSE:SNOW). These stocks are S&P Global Inc. (NYSE:SPGI), Applied Materials, Inc. (NASDAQ:AMAT), Zoetis Inc (NYSE:ZTS), Canadian National Railway Company (NYSE:CNI), Altria Group Inc (NYSE:MO), Fiserv, Inc. (NASDAQ:FISV), and NIO Limited (NYSE:NIO). All of these stocks’ market caps are closest to SNOW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPGI 75 3807859 4
AMAT 61 3632227 2
ZTS 61 2389697 3
CNI 31 2188963 5
MO 37 1082661 -10
FISV 94 5178126 4
NIO 34 2634013 -1
Average 56.1 2987649 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 56.1 hedge funds with bullish positions and the average amount invested in these stocks was $2988 million. That figure was $7723 million in SNOW’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Canadian National Railway Company (NYSE:CNI) is the least popular one with only 31 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 45.7. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and surpassed the market again by 0.8 percentage points. Unfortunately SNOW wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); SNOW investors were disappointed as the stock returned -21.5% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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