Hedge Funds Are Selling Guidewire Software Inc (GWRE)

In this article we will check out the progression of hedge fund sentiment towards Guidewire Software Inc (NYSE:GWRE) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Guidewire Software Inc (NYSE:GWRE) undervalued? Prominent investors were cutting their exposure. The number of bullish hedge fund positions retreated by 2 lately. Guidewire Software Inc (NYSE:GWRE) was in 33 hedge funds’ portfolios at the end of March. The all time high for this statistic is 35. Our calculations also showed that GWRE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 35 hedge funds in our database with GWRE positions at the end of the fourth quarter.

To most stock holders, hedge funds are seen as slow, outdated financial vehicles of the past. While there are greater than 8000 funds with their doors open at present, We hone in on the elite of this club, approximately 850 funds. It is estimated that this group of investors command most of the hedge fund industry’s total asset base, and by watching their highest performing picks, Insider Monkey has unsheathed numerous investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Eric Mandelblatt of Soroban Capital Partners

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. Keeping this in mind let’s check out the recent hedge fund action encompassing Guidewire Software Inc (NYSE:GWRE).

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

At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GWRE over the last 23 quarters. So, let’s check out 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, Sharlyn C. Heslam’s Stockbridge Partners has the largest position in Guidewire Software Inc (NYSE:GWRE), worth close to $456.2 million, accounting for 11.1% of its total 13F portfolio. The second most bullish fund manager is Anand Desai of Darsana Capital Partners, with a $254.1 million position; the fund has 7.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of William Duhamel’s Route One Investment Company, David Blood and Al Gore’s Generation Investment Management and Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners. In terms of the portfolio weights assigned to each position Anabranch Capital allocated the biggest weight to Guidewire Software Inc (NYSE:GWRE), around 22.1% of its 13F portfolio. Stockbridge Partners is also relatively very bullish on the stock, dishing out 11.11 percent of its 13F equity portfolio to GWRE.

Since Guidewire Software Inc (NYSE:GWRE) has experienced falling interest from the smart money, logic holds that there is a sect of money managers who were dropping their positions entirely by the end of the first quarter. It’s worth mentioning that David Goel and Paul Ferri’s Matrix Capital Management dropped the biggest position of the 750 funds watched by Insider Monkey, comprising about $51.5 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund said goodbye to about $20.8 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Guidewire Software Inc (NYSE:GWRE) but similarly valued. These stocks are Omega Healthcare Investors Inc (NYSE:OHI), The New York Times Company (NYSE:NYT), Ciena Corporation (NYSE:CIEN), US Foods Holding Corp. (NYSE:USFD), Marathon Oil Corporation (NYSE:MRO), Kinross Gold Corporation (NYSE:KGC), and Gold Fields Limited (NYSE:GFI). This group of stocks’ market values match GWRE’s market value.

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As you can see these stocks had an average of 30.1 hedge funds with bullish positions and the average amount invested in these stocks was $800 million. That figure was $1534 million in GWRE’s case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand Gold Fields Limited (NYSE:GFI) is the least popular one with only 15 bullish hedge fund positions. Guidewire Software Inc (NYSE:GWRE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GWRE 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. 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 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on GWRE, though not to the same extent, as the stock returned 11.3% since Q1 (through July 2nd) and outperformed the market as well.

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