We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Slack Technologies Inc (NYSE:WORK) and determine whether hedge funds skillfully traded this stock.
Is Slack Technologies Inc (NYSE:WORK) a sound investment now? Money managers were getting more optimistic. The number of bullish hedge fund positions rose by 1 lately. Slack Technologies Inc (NYSE:WORK) was in 32 hedge funds’ portfolios at the end of June. The all time high for this statistics is 37. Our calculations also showed that WORK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 31 hedge funds in our database with WORK positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Glen Kacher of Light Street Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 view the fresh hedge fund action regarding Slack Technologies Inc (NYSE:WORK).
What have hedge funds been doing with Slack Technologies Inc (NYSE:WORK)?
At the end of June, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WORK over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the largest position in Slack Technologies Inc (NYSE:WORK). Citadel Investment Group has a $60 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by 12 West Capital Management, led by Joel Ramin, holding a $55.9 million position; 2.9% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish contain Ken Griffin’s Citadel Investment Group, Glen Kacher’s Light Street Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Greenlea Lane Capital allocated the biggest weight to Slack Technologies Inc (NYSE:WORK), around 4.66% of its 13F portfolio. Greenspring Associates is also relatively very bullish on the stock, designating 4.48 percent of its 13F equity portfolio to WORK.
Consequently, specific money managers were breaking ground themselves. PEAK6 Capital Management, managed by Matthew Hulsizer, initiated the most outsized position in Slack Technologies Inc (NYSE:WORK). PEAK6 Capital Management had $7.9 million invested in the company at the end of the quarter. James Thomas Berylson’s Berylson Capital Partners also made a $6.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Caldwell’s Chiron Investment Management, Sander Gerber’s Hudson Bay Capital Management, and Michel Massoud’s Melqart Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Slack Technologies Inc (NYSE:WORK) but similarly valued. These stocks are Akamai Technologies, Inc. (NASDAQ:AKAM), Ameren Corporation (NYSE:AEE), Interactive Brokers Group, Inc. (NASDAQ:IBKR), Coca-Cola European Partners plc (NYSE:CCEP), Conagra Brands, Inc. (NYSE:CAG), iQIYI, Inc. (NASDAQ:IQ), and Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY). All of these stocks’ market caps match WORK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AKAM | 40 | 548791 | 0 |
| AEE | 19 | 474360 | -2 |
| IBKR | 32 | 695740 | 10 |
| CCEP | 27 | 464657 | 5 |
| CAG | 35 | 614220 | 5 |
| IQ | 17 | 1283437 | -11 |
| ALNY | 38 | 982898 | 4 |
| Average | 29.7 | 723443 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $723 million. That figure was $287 million in WORK’s case. Akamai Technologies, Inc. (NASDAQ:AKAM) is the most popular stock in this table. On the other hand iQIYI, Inc. (NASDAQ:IQ) is the least popular one with only 17 bullish hedge fund positions. Slack Technologies Inc (NYSE:WORK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WORK is 64.6. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately WORK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WORK were disappointed as the stock returned -17.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Slack Technologies Inc. (NYSE:WORK)
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Disclosure: None. This article was originally published at Insider Monkey.
