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salesforce.com, inc. (CRM): Hedge Funds Taking Some Chips Off The Table

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded salesforce.com, inc. (NYSE:CRM) and determine whether the smart money was really smart about this stock.

salesforce.com, inc. (NYSE:CRM) has experienced a decrease in support from the world’s most elite money managers of late. salesforce.com, inc. (NYSE:CRM) was in 107 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 117 which was achieved at the end of March as hedge funds took advantage of the declines in CRM’s stock price during the March market crash. Our calculations also showed that CRM still managed to rank #17 among the 30 most popular stocks among hedge funds (click for Q2 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 56 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.

Brad Gerstner Altimeter Capital

Brad Gerstner of Altimeter Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out ideas like this under-the-radar stock to identify the next tenbagger. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a look at the recent hedge fund action surrounding salesforce.com, inc. (NYSE:CRM).

How have hedgies been trading salesforce.com, inc. (NYSE:CRM)?

At the end of June, a total of 107 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 82 hedge funds with a bullish position in CRM 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.

Among these funds, Fisher Asset Management held the most valuable stake in salesforce.com, inc. (NYSE:CRM), which was worth $2155.5 million at the end of the third quarter. On the second spot was Altimeter Capital Management which amassed $590.8 million worth of shares. Lone Pine Capital, Matrix Capital Management, and Tiger Global Management LLC 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 TenCore Partners allocated the biggest weight to salesforce.com, inc. (NYSE:CRM), around 16.3% of its 13F portfolio. TOMS Capital is also relatively very bullish on the stock, earmarking 15.25 percent of its 13F equity portfolio to CRM.

Because salesforce.com, inc. (NYSE:CRM) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that elected to cut their entire stakes last quarter. It’s worth mentioning that Aaron Cowen’s Suvretta Capital Management dropped the largest stake of the 750 funds monitored by Insider Monkey, valued at an estimated $226.4 million in stock. Eashwar Krishnan’s fund, Tybourne Capital Management, also dumped its stock, about $208.6 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 10 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as salesforce.com, inc. (NYSE:CRM) but similarly valued. We will take a look at SAP SE (NYSE:SAP), Chevron Corporation (NYSE:CVX), Abbott Laboratories (NYSE:ABT), Eli Lilly and Company (NYSE:LLY), ASML Holding N.V. (NASDAQ:ASML), Novo Nordisk A/S (NYSE:NVO), and NIKE, Inc. (NYSE:NKE). This group of stocks’ market caps are closest to CRM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAP 16 1253641 1
CVX 50 1585417 -3
ABT 67 3504346 5
LLY 51 2161323 8
ASML 25 1961320 -5
NVO 24 3294368 0
NKE 71 2603242 -9
Average 43.4 2337665 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.4 hedge funds with bullish positions and the average amount invested in these stocks was $2.3 billion. That figure was $9.8 billion in CRM’s case. NIKE, Inc. (NYSE:NKE) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks salesforce.com, inc. (NYSE:CRM) is more popular among hedge funds. Our overall hedge fund sentiment score for CRM is 89.4. 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 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 28.2% in 2020 through August 24th but still managed to beat the market by 20.6 percentage points. Hedge funds were also right about betting on CRM, though not to the same extent, as the stock returned 11.3% since the end of June and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.