Is Splunk Inc (NASDAQ:SPLK) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Splunk Inc (NASDAQ:SPLK) has experienced a decrease in hedge fund sentiment recently. SPLK was in 25 hedge funds’ portfolios at the end of the second quarter of 2019. There were 29 hedge funds in our database with SPLK holdings at the end of the previous quarter. Our calculations also showed that SPLK isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are several gauges shareholders put to use to grade stocks. Some of the less utilized gauges are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce their index-focused peers by a solid amount (see the details here).
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to analyze the key hedge fund action regarding Splunk Inc (NASDAQ:SPLK).
How have hedgies been trading Splunk Inc (NASDAQ:SPLK)?
At the end of the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. By comparison, 35 hedge funds held shares or bullish call options in SPLK a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Splunk Inc (NASDAQ:SPLK) was held by Citadel Investment Group, which reported holding $69.3 million worth of stock at the end of March. It was followed by Polar Capital with a $45.2 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Millennium Management.
Due to the fact that Splunk Inc (NASDAQ:SPLK) has experienced a decline in interest from the smart money, logic holds that there is a sect of hedgies who were dropping their positions entirely heading into Q3. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors cut the biggest position of all the hedgies watched by Insider Monkey, worth close to $81.8 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund cut about $46.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds heading into Q3.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Splunk Inc (NASDAQ:SPLK) but similarly valued. These stocks are Rockwell Automation Inc. (NYSE:ROK), CGI Inc. (NYSE:GIB), Best Buy Co., Inc. (NYSE:BBY), and Smith & Nephew plc (NYSE:SNN). This group of stocks’ market caps match SPLK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROK | 31 | 423135 | 3 |
| GIB | 14 | 311851 | -4 |
| BBY | 31 | 991291 | -4 |
| SNN | 14 | 318986 | 1 |
| Average | 22.5 | 511316 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $511 million. That figure was $207 million in SPLK’s case. Rockwell Automation Inc. (NYSE:ROK) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 14 bullish hedge fund positions. Splunk Inc (NASDAQ:SPLK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SPLK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SPLK were disappointed as the stock returned -6.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
