Did Hedge Funds Catch A Break With Freshworks Inc. (FRSH)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 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 September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Freshworks Inc. (NASDAQ:FRSH) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Freshworks Inc. (NASDAQ:FRSH) shareholders have witnessed an increase in support from the world’s most elite money managers lately. Freshworks Inc. (NASDAQ:FRSH) was in 41 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 8. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 0 hedge funds in our database with FRSH holdings at the end of June. Our calculations also showed that FRSH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now we’re going to analyze the latest hedge fund action encompassing Freshworks Inc.(NASDAQ:FRSH).

Chase Coleman of Tiger Global

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

At the end of the third quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41 from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FRSH over the last 25 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, Driehaus Capital was the largest shareholder of Freshworks Inc. (NASDAQ:FRSH), with a stake worth $55.1 million reported as of the end of September. Trailing Driehaus Capital was Tiger Global Management LLC, which amassed a stake valued at $29.9 million. Citadel Investment Group, Millennium Management, and Castle Hook Partners 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 Pinz Capital allocated the biggest weight to Freshworks Inc. (NASDAQ:FRSH), around 1.9% of its 13F portfolio. Cavalry Asset Management is also relatively very bullish on the stock, earmarking 1.31 percent of its 13F equity portfolio to FRSH.

With a general bullishness amongst the heavyweights, key money managers have jumped into Freshworks Inc. (NASDAQ:FRSH) headfirst. Driehaus Capital, managed by Richard Driehaus, established the most outsized position in Freshworks Inc. (NASDAQ:FRSH). Driehaus Capital had $55.1 million invested in the company at the end of the quarter. Chase Coleman’s Tiger Global Management LLC also made a $29.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management, and Josh Donfeld and David Rogers’s Castle Hook Partners.

Let’s also examine hedge fund activity in other stocks similar to Freshworks Inc. (NASDAQ:FRSH). These stocks are CF Industries Holdings, Inc. (NYSE:CF), F5, Inc. (NASDAQ:FFIV), Medical Properties Trust, Inc. (NYSE:MPW), Sasol Limited (NYSE:SSL), Steel Dynamics, Inc. (NASDAQ:STLD), Marqeta Inc. (NASDAQ:MQ), and Formula One Group (NASDAQ:FWONK). This group of stocks’ market valuations match FRSH’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $841 million. That figure was $316 million in FRSH’s case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 4 bullish hedge fund positions. Freshworks Inc. (NASDAQ:FRSH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FRSH is 81.1. 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. 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 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, FRSH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FRSH were disappointed as the stock returned -49.1% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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