Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Tenable Holdings, Inc. (NASDAQ:TENB) in this article.
Is TENB a good stock to buy? Tenable Holdings, Inc. (NASDAQ:TENB) has experienced an increase in hedge fund sentiment in recent months. Tenable Holdings, Inc. (NASDAQ:TENB) was in 30 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 22 hedge funds in our database with TENB holdings at the end of June. Our calculations also showed that TENB 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 under the radar cannabis 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. Keeping this in mind let’s take a gander at the new hedge fund action regarding Tenable Holdings, Inc. (NASDAQ:TENB).
Do Hedge Funds Think TENB Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in TENB a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Select Equity Group was the largest shareholder of Tenable Holdings, Inc. (NASDAQ:TENB), with a stake worth $172.2 million reported as of the end of September. Trailing Select Equity Group was RGM Capital, which amassed a stake valued at $78.3 million. D E Shaw, Greenvale Capital, and Toronado 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 Toronado Partners allocated the biggest weight to Tenable Holdings, Inc. (NASDAQ:TENB), around 9.07% of its 13F portfolio. Greenvale Capital is also relatively very bullish on the stock, designating 7.42 percent of its 13F equity portfolio to TENB.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Select Equity Group, managed by Robert Joseph Caruso, created the biggest position in Tenable Holdings, Inc. (NASDAQ:TENB). Select Equity Group had $172.2 million invested in the company at the end of the quarter. Stephen Perkins’s Toronado Partners also made a $32.6 million investment in the stock during the quarter. The other funds with brand new TENB positions are Mark Kingdon’s Kingdon Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and David Harding’s Winton Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Tenable Holdings, Inc. (NASDAQ:TENB). We will take a look at Regal Beloit Corporation (NYSE:RBC), Builders FirstSource, Inc. (NASDAQ:BLDR), The Aaron’s Company, Inc. (NYSE:AAN), WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), Denali Therapeutics Inc. (NASDAQ:DNLI), Grand Canyon Education Inc (NASDAQ:LOPE), and World Wrestling Entertainment, Inc. (NYSE:WWE). This group of stocks’ market values are similar to TENB’s market value.
|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 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $361 million. That figure was $490 million in TENB’s case. The Aaron’s Company, Inc. (NYSE:AAN) is the most popular stock in this table. On the other hand Denali Therapeutics Inc. (NASDAQ:DNLI) is the least popular one with only 24 bullish hedge fund positions. Tenable Holdings, Inc. (NASDAQ:TENB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TENB is 60. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on TENB as the stock returned 37.4% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.