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Slack Technologies Inc (WORK): Are Hedge Funds Right About This Stock?

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 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of Slack Technologies Inc (NYSE:WORK).

Slack Technologies Inc (NYSE:WORK) has experienced an increase in hedge fund sentiment in recent months. WORK was in 31 hedge funds’ portfolios at the end of March. There were 29 hedge funds in our database with WORK holdings at the end of the previous quarter. Our calculations also showed that WORK 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 51 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.

Glen Kacher of Light Street Capital

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 trades like this one. 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 glance at the new hedge fund action surrounding Slack Technologies Inc (NYSE:WORK).

How are hedge funds trading Slack Technologies Inc (NYSE:WORK)?

At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in WORK over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Slack Technologies Inc (NYSE:WORK) was held by Abdiel Capital Advisors, which reported holding $162.3 million worth of stock at the end of September. It was followed by Light Street Capital with a $109.5 million position. Other investors bullish on the company included 12 West Capital Management, D E Shaw, and PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Abdiel Capital Advisors allocated the biggest weight to Slack Technologies Inc (NYSE:WORK), around 7.59% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, dishing out 5.76 percent of its 13F equity portfolio to WORK.

Consequently, key money managers were breaking ground themselves. Abdiel Capital Advisors, managed by Colin Moran, initiated the biggest position in Slack Technologies Inc (NYSE:WORK). Abdiel Capital Advisors had $162.3 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $38.1 million position during the quarter. The following funds were also among the new WORK investors: Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital, Andrew Sandler’s Sandler Capital Management, and Greg Eisner’s Engineers Gate Manager.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Slack Technologies Inc (NYSE:WORK) but similarly valued. These stocks are Chewy, Inc. (NYSE:CHWY), ORIX Corporation (NYSE:IX), Akamai Technologies, Inc. (NASDAQ:AKAM), and The Cooper Companies, Inc. (NYSE:COO). This group of stocks’ market values match WORK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHWY 36 493004 1
IX 4 6659 -2
AKAM 40 757103 4
COO 25 931667 -3
Average 26.25 547108 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $547 million. That figure was $465 million in WORK’s case. Akamai Technologies, Inc. (NASDAQ:AKAM) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. Slack Technologies Inc (NYSE:WORK) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on WORK as the stock returned 30.6% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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