Do Hedge Funds Love nCino, Inc. (NCNO)?

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 nCino, Inc. (NASDAQ:NCNO) changed recently.

nCino, Inc. (NASDAQ:NCNO) has seen an increase in hedge fund sentiment of late. nCino, Inc. (NASDAQ:NCNO) was in 25 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 28. Our calculations also showed that NCNO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 79 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.

Chase Coleman of Tiger Global

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. With all of this in mind we’re going to view the latest hedge fund action surrounding nCino, Inc. (NASDAQ:NCNO).

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

At the end of the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in NCNO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in nCino, Inc. (NASDAQ:NCNO) was held by HMI Capital, which reported holding $294 million worth of stock at the end of June. It was followed by Islet Management with a $19.7 million position. Other investors bullish on the company included Tiger Global Management LLC, Millennium Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position HMI Capital allocated the biggest weight to nCino, Inc. (NASDAQ:NCNO), around 9.21% of its 13F portfolio. JCSD Capital is also relatively very bullish on the stock, earmarking 2.59 percent of its 13F equity portfolio to NCNO.

Consequently, some big names have jumped into nCino, Inc. (NASDAQ:NCNO) headfirst. Renaissance Technologies, assembled the biggest position in nCino, Inc. (NASDAQ:NCNO). Renaissance Technologies had $14.4 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also initiated a $6 million position during the quarter. The other funds with brand new NCNO positions are Frank Fu’s CaaS Capital, D. E. Shaw’s D E Shaw, and David Costen Haley’s HBK Investments.

Let’s check out hedge fund activity in other stocks similar to nCino, Inc. (NASDAQ:NCNO). We will take a look at Vroom, Inc. (NASDAQ:VRM), Exelixis, Inc. (NASDAQ:EXEL), Select Medical Holdings Corporation (NYSE:SEM), Herbalife Nutrition Ltd. (NYSE:HLF), TFS Financial Corporation (NASDAQ:TFSL), Fisker Inc. (NYSE:FSR), and PLDT Inc. (NYSE:PHI). This group of stocks’ market values match NCNO’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $545 million. That figure was $413 million in NCNO’s case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 bullish hedge fund positions. nCino, Inc. (NASDAQ:NCNO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NCNO is 64.4. 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 October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on NCNO as the stock returned 16.2% since the end of Q2 (through 10/22) 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.