Where Do Hedge Funds Stand On Cornerstone OnDemand, Inc. (CSOD)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Cornerstone OnDemand, Inc. (NASDAQ:CSOD) changed recently.

Is Cornerstone OnDemand, Inc. (NASDAQ:CSOD) ready to rally soon? Money managers were becoming less confident. The number of bullish hedge fund bets were cut by 6 recently. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) was in 28 hedge funds’ portfolios at the end of March. The all time high for this statistic is 34. Our calculations also showed that CSOD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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 recent hedge fund action encompassing Cornerstone OnDemand, Inc. (NASDAQ:CSOD).

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

At the end of March, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in CSOD a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Is CSOD A Good Stock To Buy?

More specifically, Rivulet Capital was the largest shareholder of Cornerstone OnDemand, Inc. (NASDAQ:CSOD), with a stake worth $180.2 million reported as of the end of March. Trailing Rivulet Capital was RGM Capital, which amassed a stake valued at $131.2 million. P2 Capital Partners, Indaba Capital Management, and Greenhouse Funds 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 Rivulet Capital allocated the biggest weight to Cornerstone OnDemand, Inc. (NASDAQ:CSOD), around 9.77% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, setting aside 8.04 percent of its 13F equity portfolio to CSOD.

Seeing as Cornerstone OnDemand, Inc. (NASDAQ:CSOD) has experienced bearish sentiment from hedge fund managers, logic holds that there is a sect of funds that slashed their positions entirely heading into Q2. Interestingly, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management dumped the biggest position of all the hedgies watched by Insider Monkey, totaling close to $2.6 million in stock, and Michel Massoud’s Melqart Asset Management was right behind this move, as the fund said goodbye to about $2.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 6 funds heading into Q2.

Let’s now take a look at hedge fund activity in other stocks similar to Cornerstone OnDemand, Inc. (NASDAQ:CSOD). These stocks are ESCO Technologies Inc. (NYSE:ESE), PJT Partners Inc (NYSE:PJT), 2U Inc (NASDAQ:TWOU), Editas Medicine, Inc. (NASDAQ:EDIT), Masonite International Corp (NYSE:DOOR), SITE Centers Corp. (NYSE:SITC), and Cooper Tire & Rubber Company (NYSE:CTB). This group of stocks’ market caps resemble CSOD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ESE 8 85089 -5
PJT 22 90165 0
TWOU 23 745360 1
EDIT 24 471562 7
DOOR 31 405857 3
SITC 9 71139 -2
CTB 24 307379 1
Average 20.1 310936 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $652 million in CSOD’s case. Masonite International Corp (NYSE:DOOR) is the most popular stock in this table. On the other hand ESCO Technologies Inc. (NYSE:ESE) is the least popular one with only 8 bullish hedge fund positions. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CSOD is 67.2. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on CSOD as the stock returned 18.6% since the end of Q1 (through 7/9) 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.