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Splunk Inc (SPLK): 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 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 Splunk Inc (NASDAQ:SPLK).

Splunk Inc (NASDAQ:SPLK) has seen a decrease in enthusiasm from smart money recently. Our calculations also showed that SPLK 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Atterbury - Whetstone Capital

David Atterbury of Whetstone Capital Advisors

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. With all of this in mind let’s go over the new hedge fund action surrounding Splunk Inc (NASDAQ:SPLK).

What have hedge funds been doing with Splunk Inc (NASDAQ:SPLK)?

At the end of the first quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SPLK over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

More specifically, Iridian Asset Management was the largest shareholder of Splunk Inc (NASDAQ:SPLK), with a stake worth $73.4 million reported as of the end of September. Trailing Iridian Asset Management was Polar Capital, which amassed a stake valued at $59.4 million. Citadel Investment Group, North Peak Capital, and Motley Fool Asset 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 North Peak Capital allocated the biggest weight to Splunk Inc (NASDAQ:SPLK), around 15.6% of its 13F portfolio. Kayak Investment Partners is also relatively very bullish on the stock, dishing out 6.99 percent of its 13F equity portfolio to SPLK.

Since Splunk Inc (NASDAQ:SPLK) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of money managers that slashed their positions entirely in the third quarter. At the top of the heap, Josh Resnick’s Jericho Capital Asset Management cut the largest stake of all the hedgies followed by Insider Monkey, totaling about $103.6 million in stock. Jacob Doft’s fund, Highline Capital Management, also dropped its stock, about $39.6 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Splunk Inc (NASDAQ:SPLK). We will take a look at Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), ANSYS, Inc. (NASDAQ:ANSS), KKR & Co Inc. (NYSE:KKR), and Edison International (NYSE:EIX). This group of stocks’ market caps are similar to SPLK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALXN 56 3058097 8
ANSS 31 1059903 -2
KKR 48 2694120 -8
EIX 29 1046389 -5
Average 41 1964627 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1965 million. That figure was $340 million in SPLK’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Edison International (NYSE:EIX) is the least popular one with only 29 bullish hedge fund positions. Splunk Inc (NASDAQ:SPLK) is not the least popular stock in this group but hedge fund interest is still below 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 and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on SPLK as the stock returned 47.2% during the second quarter and outperformed the market by an even larger margin.

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