Was The Smart Money Right About Elastic N.V. (ESTC)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Elastic N.V. (NYSE:ESTC) based on those filings.

Elastic N.V. (NYSE:ESTC) was in 49 hedge funds’ portfolios at the end of December. The all time high for this statistic was previously 43. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ESTC investors should pay attention to an increase in hedge fund sentiment in recent months. There were 36 hedge funds in our database with ESTC positions at the end of the third quarter. Our calculations also showed that ESTC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Today there are a large number of indicators stock traders have at their disposal to assess publicly traded companies. A pair of the most useful indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top money managers can outpace the S&P 500 by a superb amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Chase Coleman of Tiger Global

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing Elastic N.V. (NYSE:ESTC).

Do Hedge Funds Think ESTC Is A Good Stock To Buy Now?

At Q4’s end, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in ESTC over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Sylebra Capital Management was the largest shareholder of Elastic N.V. (NYSE:ESTC), with a stake worth $687.6 million reported as of the end of December. Trailing Sylebra Capital Management was Tiger Global Management LLC, which amassed a stake valued at $587.4 million. Arrowstreet Capital, Renaissance Technologies, and XN Exponent Advisors 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 Sylebra Capital Management allocated the biggest weight to Elastic N.V. (NYSE:ESTC), around 17.51% of its 13F portfolio. Greenhaven Road Investment Management is also relatively very bullish on the stock, dishing out 8.61 percent of its 13F equity portfolio to ESTC.

As aggregate interest increased, key hedge funds were breaking ground themselves. XN Exponent Advisors, managed by Gaurav Kapadia, initiated the biggest position in Elastic N.V. (NYSE:ESTC). XN Exponent Advisors had $84.7 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also initiated a $70.2 million position during the quarter. The other funds with brand new ESTC positions are Suraj Parkash Chopra’s Force Hill Capital Management, Israel Englander’s Millennium Management, and Panayotis Takis Sparaggis’s Alkeon Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Elastic N.V. (NYSE:ESTC). We will take a look at C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), United Airlines Holdings Inc (NASDAQ:UAL), Franklin Resources, Inc. (NYSE:BEN), FactSet Research Systems Inc. (NYSE:FDS), China Southern Airlines Co Ltd (NYSE:ZNH), Molina Healthcare, Inc. (NYSE:MOH), and Evergy, Inc. (NYSE:EVRG). This group of stocks’ market values match ESTC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHRW 29 622398 7
UAL 52 1096410 12
BEN 33 268664 0
FDS 30 311111 1
ZNH 3 12698 0
MOH 27 1384810 -8
EVRG 33 1403512 -4
Average 29.6 728515 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $729 million. That figure was $2229 million in ESTC’s case. United Airlines Holdings Inc (NASDAQ:UAL) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. Elastic N.V. (NYSE:ESTC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ESTC is 86.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately ESTC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ESTC were disappointed as the stock returned -17.5% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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