Should You Buy Cloudera, Inc. (CLDR)?

In this article you are going to find out whether hedge funds think Cloudera, Inc. (NYSE:CLDR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Cloudera, Inc. (NYSE:CLDR) a healthy stock for your portfolio? The smart money is taking a bullish view. The number of long hedge fund bets rose by 4 recently. Our calculations also showed that CLDR 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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 let’s take a look at the key hedge fund action surrounding Cloudera, Inc. (NYSE:CLDR).

Hedge fund activity in Cloudera, Inc. (NYSE:CLDR)

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in CLDR a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Is CLDR A Good Stock To Buy?

More specifically, Icahn Capital LP was the largest shareholder of Cloudera, Inc. (NYSE:CLDR), with a stake worth $431.2 million reported as of the end of September. Trailing Icahn Capital LP was RGM Capital, which amassed a stake valued at $55.7 million. Coliseum Capital, Renaissance Technologies, and Citadel Investment Group 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 Coliseum Capital allocated the biggest weight to Cloudera, Inc. (NYSE:CLDR), around 6.65% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, dishing out 4.38 percent of its 13F equity portfolio to CLDR.

Consequently, key money managers were leading the bulls’ herd. Coliseum Capital, managed by Christopher Shackelton and Adam Gray, assembled the most valuable position in Cloudera, Inc. (NYSE:CLDR). Coliseum Capital had $24.6 million invested in the company at the end of the quarter. George McCabe’s Portolan Capital Management also initiated a $5.8 million position during the quarter. The other funds with brand new CLDR positions are Noam Gottesman’s GLG Partners, Peter Muller’s PDT Partners, and Cliff Asness’s AQR Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cloudera, Inc. (NYSE:CLDR) but similarly valued. We will take a look at Atlantica Yield plc (NASDAQ:AY), Brooks Automation, Inc. (NASDAQ:BRKS), Mercury General Corporation (NYSE:MCY), and Sabra Health Care REIT Inc (NASDAQ:SBRA). This group of stocks’ market values are closest to CLDR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AY 13 77287 -3
BRKS 18 98547 -10
MCY 22 193565 1
SBRA 17 146830 -10
Average 17.5 129057 -5.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $584 million in CLDR’s case. Mercury General Corporation (NYSE:MCY) is the most popular stock in this table. On the other hand Atlantica Yield plc (NASDAQ:AY) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Cloudera, Inc. (NYSE:CLDR) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on CLDR as the stock returned 30.2% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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