Like everyone else, successful investors make mistakes. Some of their top consensus picks, such as Valeant and SunEdison, have not done well during the last 12 months due to various reasons. Nevertheless, the data show successful investors’ consensus picks have done well on average. The top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters. S&P 500 Index returned only 7.6% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what successful funds and billionaire investors think before doing extensive research on a stock. In this article, we take a closer look at salesforce.com, inc. (NYSE:CRM) from the perspective of those successful funds.
Is salesforce.com, inc. (NYSE:CRM) a first-rate investment right now? Hedge funds are thoroughly taking an optimistic view. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings inched up by 6 lately. CRM was in 66 hedge funds’ portfolios at the end of September. There were 60 hedge funds in our database with CRM positions at the end of the previous quarter. At the end of this article we will also compare CRM to other stocks including The Southern Company (NYSE:SO), American Tower Corp (NYSE:AMT), and Ford Motor Company (NYSE:F) to get a better sense of its popularity.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Keeping this in mind, let’s take a look at the recent action encompassing salesforce.com, inc. (NYSE:CRM).
What does the smart money think about salesforce.com, inc. (NYSE:CRM)?
At the end of the third quarter, a total of 66 of the hedge funds tracked by Insider Monkey were long this stock, up by 10% from the second quarter of 2016. By comparison, 61 hedge funds held shares or bullish call options in CRM heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in salesforce.com, inc. (NYSE:CRM), worth close to $248.2 million. On Arrowstreet Capital’s heels is Andreas Halvorsen of Viking Global, with a $214.9 million position. Other members of the smart money that are bullish comprise Eashwar Krishnan’s Tybourne Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and Christopher Lord’s Criterion Capital. We should note that Tybourne Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Anand Parekh’s Alyeska Investment Group initiated a $70.9 million position during the quarter. The other funds with brand new CRM positions are Josh Resnick’s Jericho Capital Asset Management, Ken Griffin’s Citadel Investment Group, and Adam Wolfberg and Steven Landry’s EastBay Asset Management.
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 The Southern Company (NYSE:SO), American Tower Corp (NYSE:AMT), Ford Motor Company (NYSE:F), and ABB Ltd (ADR) (NYSE:ABB). All of these stocks’ market caps match CRM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SO | 20 | 568071 | -1 |
| AMT | 48 | 2928784 | -1 |
| F | 32 | 683624 | 1 |
| ABB | 10 | 190397 | -1 |
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1.09 billion. That figure was $2.14 billion in CRM’s case. American Tower Corp (NYSE:AMT) is the most popular stock in this table. On the other hand ABB Ltd (ADR) (NYSE:ABB) 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. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
