At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards CommVault Systems, Inc. (NASDAQ:CVLT).
Is CommVault Systems, Inc. (NASDAQ:CVLT) a splendid stock to buy now? Prominent investors are getting less optimistic. The number of long hedge fund bets shrunk by 15 in recent months. Our calculations also showed that CVLT isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
In the eyes of most investors, hedge funds are assumed to be slow, outdated investment vehicles of yesteryear. While there are more than 8000 funds trading today, We hone in on the top tier of this group, approximately 850 funds. These money managers watch over the lion’s share of all hedge funds’ total asset base, and by paying attention to their unrivaled investments, Insider Monkey has identified a few investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the new hedge fund action regarding CommVault Systems, Inc. (NASDAQ:CVLT).
How are hedge funds trading CommVault Systems, Inc. (NASDAQ:CVLT)?
Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -45% from the previous quarter. By comparison, 29 hedge funds held shares or bullish call options in CVLT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Starboard Value LP was the largest shareholder of CommVault Systems, Inc. (NASDAQ:CVLT), with a stake worth $186.9 million reported as of the end of September. Trailing Starboard Value LP was Renaissance Technologies, which amassed a stake valued at $90.3 million. Citadel Investment Group, D E Shaw, and AQR Capital Management 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 Starboard Value LP allocated the biggest weight to CommVault Systems, Inc. (NASDAQ:CVLT), around 7.58% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, dishing out 3 percent of its 13F equity portfolio to CVLT.
Due to the fact that CommVault Systems, Inc. (NASDAQ:CVLT) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that elected to cut their full holdings by the end of the first quarter. Interestingly, Ken Grossman and Glen Schneider’s SG Capital Management sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising about $10.5 million in stock. Mark Coe’s fund, Intrinsic Edge Capital, also cut its stock, about $7.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 15 funds by the end of the first quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CommVault Systems, Inc. (NASDAQ:CVLT) but similarly valued. These stocks are Wintrust Financial Corporation (NASDAQ:WTFC), Amkor Technology, Inc. (NASDAQ:AMKR), First Interstate Bancsystem Inc (NASDAQ:FIBK), and Commercial Metals Company (NYSE:CMC). This group of stocks’ market caps resemble CVLT’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 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $464 million in CVLT’s case. Amkor Technology, Inc. (NASDAQ:AMKR) is the most popular stock in this table. On the other hand First Interstate Bancsystem Inc (NASDAQ:FIBK) is the least popular one with only 7 bullish hedge fund positions. CommVault Systems, Inc. (NASDAQ:CVLT) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately CVLT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CVLT investors were disappointed as the stock returned -6.7% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.