Where Do Hedge Funds Stand On New Relic (NEWR)?

After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards New Relic Inc (NYSE:NEWR).

Is New Relic Inc (NYSE:NEWR) the right investment to pursue these days? The smart money was selling. The number of long hedge fund positions shrunk by 4 recently. New Relic Inc (NYSE:NEWR) was in 31 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 44. Our calculations also showed that NEWR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 35 hedge funds in our database with NEWR positions at the end of the second quarter.

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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.

Barry Rosenstein - Jana Partners

Barry Rosenstein of JANA Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let’s take a look at the latest hedge fund action surrounding New Relic Inc (NYSE:NEWR).

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

At the end of September, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NEWR over the last 21 quarters. With hedgies’ 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).

The largest stake in New Relic Inc (NYSE:NEWR) was held by Eminence Capital, which reported holding $303.6 million worth of stock at the end of September. It was followed by Matrix Capital Management with a $281.8 million position. Other investors bullish on the company included HMI Capital, Citadel Investment Group, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position HMI Capital allocated the biggest weight to New Relic Inc (NYSE:NEWR), around 9.32% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, dishing out 8.31 percent of its 13F equity portfolio to NEWR.

Judging by the fact that New Relic Inc (NYSE:NEWR) has witnessed declining sentiment from the smart money, we can see that there were a few funds that slashed their positions entirely last quarter. At the top of the heap, Chase Coleman’s Tiger Global Management LLC dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth an estimated $92.7 million in stock, and Guy Shahar’s DSAM Partners was right behind this move, as the fund said goodbye to about $11.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as New Relic Inc (NYSE:NEWR) but similarly valued. We will take a look at Velodyne Lidar, Inc. (NASDAQ:VLDR), Twist Bioscience Corporation (NASDAQ:TWST), Stantec Inc. (NYSE:STN), Iridium Communications Inc. (NASDAQ:IRDM), TG Therapeutics Inc (NASDAQ:TGTX), Global Blood Therapeutics Inc (NASDAQ:GBT), and Parsons Corporation (NYSE:PSN). All of these stocks’ market caps are closest to NEWR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VLDR 13 121409 -3
TWST 21 408033 2
STN 8 82259 3
IRDM 15 135802 -4
TGTX 30 718643 -4
GBT 29 662293 -2
PSN 16 84915 1
Average 18.9 316193 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $316 million. That figure was $1144 million in NEWR’s case. TG Therapeutics Inc (NASDAQ:TGTX) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks New Relic Inc (NYSE:NEWR) is more popular among hedge funds. Our overall hedge fund sentiment score for NEWR is 72.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on NEWR as the stock returned 22.9% since the end of September (through 12/18) 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.

Follow New Relic Inc. (NYSE:NEWR)

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