Hedge Funds Are Buying Medallia, Inc. (MDLA)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Medallia, Inc. (NYSE:MDLA) in this article.

Is Medallia, Inc. (NYSE:MDLA) a marvelous stock to buy now? Money managers were taking an optimistic view. The number of long hedge fund bets went up by 4 in recent months. Medallia, Inc. (NYSE:MDLA) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistic is 24. Our calculations also showed that MDLA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 19 hedge funds in our database with MDLA holdings at the end of March.

At the moment there are many methods stock traders have at their disposal to assess stocks. A pair of the best methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace their index-focused peers by a superb margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Kerr Neilson of Platinum Asset Management

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. Now let’s take a look at the fresh hedge fund action surrounding Medallia, Inc. (NYSE:MDLA).

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

At Q2’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in MDLA 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 Medallia, Inc. (NYSE:MDLA) was held by SCGE Management, which reported holding $138.3 million worth of stock at the end of June. It was followed by Greenvale Capital with a $104.6 million position. Other investors bullish on the company included Platinum Asset Management, Pentwater Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Greenvale Capital allocated the biggest weight to Medallia, Inc. (NYSE:MDLA), around 11.54% of its 13F portfolio. Washington Harbour Partners is also relatively very bullish on the stock, setting aside 1.87 percent of its 13F equity portfolio to MDLA.

Consequently, key money managers were leading the bulls’ herd. Pentwater Capital Management, managed by Matthew Halbower, initiated the biggest position in Medallia, Inc. (NYSE:MDLA). Pentwater Capital Management had $15 million invested in the company at the end of the quarter. Farallon Capital also initiated a $8.1 million position during the quarter. The following funds were also among the new MDLA investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Brandon Haley’s Holocene Advisors, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s check out hedge fund activity in other stocks similar to Medallia, Inc. (NYSE:MDLA). These stocks are HollyFrontier Corporation (NYSE:HFC), SolarWinds Corporation (NYSE:SWI), Iridium Communications Inc. (NASDAQ:IRDM), Schrodinger, Inc. (NASDAQ:SDGR), Lancaster Colony Corporation (NASDAQ:LANC), Chart Industries, Inc. (NYSE:GTLS), and JetBlue Airways Corporation (NASDAQ:JBLU). This group of stocks’ market values are closest to MDLA’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $603 million. That figure was $364 million in MDLA’s case. HollyFrontier Corporation (NYSE:HFC) is the most popular stock in this table. On the other hand Iridium Communications Inc. (NASDAQ:IRDM) is the least popular one with only 18 bullish hedge fund positions. Medallia, Inc. (NYSE:MDLA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MDLA is 58.6. 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 negative signal and 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately MDLA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MDLA investors were disappointed as the stock returned 0.6% since the end of June (through 10/22) 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 most of these stocks already outperformed the market in 2021.

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