We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Atlassian Corporation Plc (NASDAQ:TEAM).
Is TEAM a good stock to buy now? Atlassian Corporation Plc (NASDAQ:TEAM) investors should be aware of a decrease in hedge fund sentiment recently. Atlassian Corporation Plc (NASDAQ:TEAM) was in 48 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 62. There were 55 hedge funds in our database with TEAM holdings at the end of June. Our calculations also showed that TEAM 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this cannabis tech stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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. Now we’re going to check out the key hedge fund action encompassing Atlassian Corporation Plc (NASDAQ:TEAM).
Do Hedge Funds Think TEAM Is A Good Stock To Buy Now?
At third quarter’s end, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the second quarter of 2020. On the other hand, there were a total of 53 hedge funds with a bullish position in TEAM a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Atlassian Corporation Plc (NASDAQ:TEAM), which was worth $1072.2 million at the end of the third quarter. On the second spot was Lone Pine Capital which amassed $598 million worth of shares. Tiger Global Management LLC, Alkeon Capital Management, and Viking Global 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 Strategy Capital allocated the biggest weight to Atlassian Corporation Plc (NASDAQ:TEAM), around 12.59% of its 13F portfolio. Stony Point Capital is also relatively very bullish on the stock, dishing out 6.35 percent of its 13F equity portfolio to TEAM.
Since Atlassian Corporation Plc (NASDAQ:TEAM) has experienced falling interest from the entirety of the hedge funds we track, we can see that there were a few hedgies that elected to cut their positions entirely in the third quarter. It’s worth mentioning that Rajiv Jain’s GQG Partners sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $130.7 million in stock. Brandon Haley’s fund, Holocene Advisors, also dropped its stock, about $122.4 million worth. These moves are interesting, as total hedge fund interest was cut by 7 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Atlassian Corporation Plc (NASDAQ:TEAM). These stocks are Biogen Inc. (NASDAQ:BIIB), Westpac Banking Corporation (NYSE:WBK), Relx PLC (NYSE:RELX), Analog Devices, Inc. (NASDAQ:ADI), Lululemon Athletica inc. (NASDAQ:LULU), CNOOC Limited (NYSE:CEO), and Koninklijke Philips NV (NYSE:PHG). This group of stocks’ market caps are similar to TEAM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $1219 million. That figure was $3229 million in TEAM’s case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. Atlassian Corporation Plc (NASDAQ:TEAM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TEAM is 61.2. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on TEAM as the stock returned 26.4% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.