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New Relic Inc (NEWR): Are Hedge Funds Right About This Stock?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors endured a torrid quarter, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards New Relic Inc (NYSE:NEWR).

New Relic Inc (NYSE:NEWR) investors should pay attention to an increase in hedge fund sentiment in recent months. NEWR was in 17 hedge funds’ portfolios at the end of September. There were 14 hedge funds in our database with NEWR positions at the end of the previous quarter. At the end of this article we will also compare NEWR to other stocks including Dorman Products Inc. (NASDAQ:DORM), American Equity Investment Life Holding (NYSE:AEL), and GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) to get a better sense of its popularity.

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To most investors, hedge funds are assumed to be underperforming, outdated investment tools of the past. While there are more than 8000 funds with their doors open at the moment, Our researchers look at the aristocrats of this group, around 700 funds. These investment experts manage the majority of the smart money’s total capital, and by tailing their unrivaled equity investments, Insider Monkey has figured out various investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.

With all of this in mind, let’s check out the latest action regarding New Relic Inc (NYSE:NEWR).

Hedge fund activity in New Relic Inc (NYSE:NEWR)

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 21% from one quarter earlier. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Matrix Capital Management, managed by David Goel and Paul Ferri, holds the biggest position in New Relic Inc (NYSE:NEWR). According to its latest quarterly report, the fund has a $123.8 million position in the stock, comprising 5.7% of its 13F portfolio. On Matrix Capital Management’s heels is Passport Capital, led by John Burbank, holding a $36.2 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism include Michael R. Weisberg’s Crestwood Capital Management, Drew Cupps’s Cupps Capital Management and Alex Sacerdote’s Whale Rock Capital Management.

Consequently, some big names have been driving this bullishness. Cupps Capital Management, managed by Drew Cupps, created the biggest position in New Relic Inc (NYSE:NEWR), worth an estimated $13.7 million at the end of the quarter. Clifford Fox’s Columbus Circle Investors also initiated a $12 million position during the quarter. The other funds with new positions in the stock are Leon Shaulov’s Maplelane Capital, D. E. Shaw’s D E Shaw, and Steve Cohen’s Point72 Asset Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as New Relic Inc (NYSE:NEWR) but similarly valued. We will take a look at Dorman Products Inc. (NASDAQ:DORM), American Equity Investment Life Holding (NYSE:AEL), GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH), and Columbia Banking System Inc (NASDAQ:COLB). This group of stocks’ market values resemble NEWR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DORM 9 129717 -5
AEL 24 242872 12
GWPH 19 193759 4
COLB 14 131452 3

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $239 million in NEWR’s case, a good sign. American Equity Investment Life Holding (NYSE:AEL) is the most popular stock in this table, whereas Dorman Products Inc. (NASDAQ:DORM) is the least popular one with only 9 bullish hedge fund positions. New Relic Inc (NYSE:NEWR) is not the most popular stock in this group, but hedge fund interest is still above average. Although this is a slightly positive signal, we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AEL might be a better candidate to consider a long position.

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