How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding salesforce.com, inc. (NYSE:CRM) and determine whether hedge funds had an edge regarding this stock.
salesforce.com, inc. (NYSE:CRM) was in 119 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 117. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CRM investors should be aware of an increase in activity from the world’s largest hedge funds recently. There were 108 hedge funds in our database with CRM positions at the end of the second quarter. Our calculations also showed that CRM ranked #11 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 take a peek at the key hedge fund action regarding salesforce.com, inc. (NYSE:CRM).
Charles Akre of Akre Capital Management
Do Hedge Funds Think CRM Is A Good Stock To Buy Now?
At Q3’s end, a total of 119 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. By comparison, 106 hedge funds held shares or bullish call options in CRM a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of salesforce.com, inc. (NYSE:CRM), with a stake worth $3772.6 million reported as of the end of September. Trailing Fisher Asset Management was Citadel Investment Group, which amassed a stake valued at $1166.8 million. Arrowstreet Capital, Akre Capital Management, and Matrix Capital Management 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 Greenlea Lane Capital allocated the biggest weight to salesforce.com, inc. (NYSE:CRM), around 22.16% of its 13F portfolio. TenCore Partners is also relatively very bullish on the stock, earmarking 17.25 percent of its 13F equity portfolio to CRM.
Now, specific money managers were breaking ground themselves. GQG Partners, managed by Rajiv Jain, created the largest position in salesforce.com, inc. (NYSE:CRM). GQG Partners had $586.8 million invested in the company at the end of the quarter. Leon Shaulov’s Maplelane Capital also made a $252.2 million investment in the stock during the quarter. The other funds with brand new CRM positions are Robert Pohly’s Samlyn Capital, Dmitry Balyasny’s Balyasny Asset Management, and Doug Silverman and Alexander Klabin’s Senator Investment Group.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as salesforce.com, inc. (NYSE:CRM) but similarly valued. We will take a look at Comcast Corporation (NASDAQ:CMCSA), Shell plc (NYSE:RDS), Exxon Mobil Corporation (NYSE:XOM), Toyota Motor Corporation (NYSE:TM), Pfizer Inc. (NYSE:PFE), Oracle Corporation (NYSE:ORCL), and NIKE, Inc. (NYSE:NKE). This group of stocks’ market valuations resemble CRM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMCSA | 75 | 8547154 | -9 |
| RDS | 33 | 2053904 | -5 |
| XOM | 64 | 4640444 | -4 |
| TM | 10 | 876130 | -2 |
| PFE | 74 | 2662716 | 7 |
| ORCL | 56 | 3473487 | 1 |
| NKE | 70 | 5682126 | 3 |
| Average | 54.6 | 3990852 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 54.6 hedge funds with bullish positions and the average amount invested in these stocks was $3991 million. That figure was $14901 million in CRM’s case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks salesforce.com, inc. (NYSE:CRM) is more popular among hedge funds. Our overall hedge fund sentiment score for CRM is 95. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, CRM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CRM were disappointed as the stock returned -14.2% since the end of the third quarter (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.
