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Were Hedge Funds Right About Piling Into Atlassian Corporation Plc (TEAM)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Atlassian Corporation Plc (NASDAQ:TEAM) based on that data.

Atlassian Corporation Plc (NASDAQ:TEAM) investors should pay attention to an increase in support from the world’s most elite money managers recently. TEAM was in 62 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 53 hedge funds in our database with TEAM holdings at the end of the previous quarter. Our calculations also showed that TEAM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 41 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.

Chase Coleman Tiger Global Management

Chase Coleman of Tiger Global Management

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. Federal Reserve and Central Banks all around world are printing money like there is no tomorrow, so we check out this this precious metals expert’s stock pick. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the new hedge fund action encompassing Atlassian Corporation Plc (NASDAQ:TEAM).

How are hedge funds trading Atlassian Corporation Plc (NASDAQ:TEAM)?

At Q4’s end, a total of 62 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TEAM over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Atlassian Corporation Plc (NASDAQ:TEAM), which was worth $731.9 million at the end of the third quarter. On the second spot was Lone Pine Capital which amassed $336.9 million worth of shares. Citadel Investment Group, Tybourne 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 Strategy Capital allocated the biggest weight to Atlassian Corporation Plc (NASDAQ:TEAM), around 17.73% of its 13F portfolio. Tybourne Capital Management is also relatively very bullish on the stock, earmarking 7.19 percent of its 13F equity portfolio to TEAM.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Steadfast Capital Management, managed by Robert Pitts, assembled the most valuable position in Atlassian Corporation Plc (NASDAQ:TEAM). Steadfast Capital Management had $121.4 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $97.7 million investment in the stock during the quarter. The following funds were also among the new TEAM investors: Anand Parekh’s Alyeska Investment Group, Leon Shaulov’s Maplelane Capital, and Richard Walters II’s Stony Point Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Atlassian Corporation Plc (NASDAQ:TEAM) but similarly valued. These stocks are AvalonBay Communities Inc (NYSE:AVB), Canon Inc. (NYSE:CAJ), Wisconsin Energy Group, Inc. (NYSE:WEC), and Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC). All of these stocks’ market caps are closest to TEAM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVB 23 442044 2
CAJ 8 69992 0
WEC 15 211776 -7
ERIC 18 367933 -2
Average 16 272936 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $273 million. That figure was $2649 million in TEAM’s case. AvalonBay Communities Inc (NYSE:AVB) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Atlassian Corporation Plc (NASDAQ:TEAM) 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 lost 1.0% in 2020 through April 20th but still managed to beat the market by 11 percentage points. Hedge funds were also right about betting on TEAM as the stock returned 26.8% so far in 2020 (through April 20th) 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.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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