Hedge Funds Are Selling These Cloud Computing Stocks

Equinix Inc (NASDAQ:EQIX)

 – Investors with long positions (as of March 31) : 43

 – Aggregate value of investors’ holdings (as of March 31): $2.98 Billion

With year-to-date gains of 21.2%, Equinix Inc (NASDAQ:EQIX) is the best performing cloud computing stock so far in 2016 among those in this list. However, since a large part of those gains came in the second quarter, hedge funds that sold or reduced their stakes in the company during the first quarter are likely regretting their move thus far. Ownership of Equinix Inc (NASDAQ:EQIX) among the funds covered by Insider Monkey decreased by four in the first quarter, while the aggregate value of their holdings in it fell by $534 million. Among the few funds that made the wise decision (in retrospect) to increase their stakes in the company during the first quarter was Edmond M. Safra’s EMS Capital, which boosted its holding by 15% to 240,000 shares. Equinix is one of the few cloud computing companies that pays a dividend to its shareholders, with the $1.75 per share quarterly dividend it pays translating into an annual dividend yield of 1.91%.

Rackspace Hosting, Inc. (NYSE:RAX)

 – Investors with long positions (as of March 31) : 24

 – Aggregate value of investors’ holdings (as of March 31): $523.08 Million

Shares of Rackspace Hosting, Inc. (NYSE:RAX) have suffered a massive decline in the past twelve months, losing almost 57% of their value. While they have managed to recoup some of the losses that they suffered at the beginning of this year, they are still trading in the red for 2016. In the past, Rackspace Hosting, Inc. (NYSE:RAX) lost a lot of ground in the cloud computing market by trying to compete directly with the likes of Amazon Web Services and Microsoft’s Azure. However, after the company announced that its ‘fanatical support’ will cover both those platforms in separate announcements during the second-half of 2015, industry observers and analysts became bullish on the future prospects of the company. Hedge funds in our system on the other hand don’t seem to share that sentiment, as ownership of Rackspace fell by 20% in the first quarter and the aggregate value of their holdings in it declined by $162 million. Funds that initiated a stake in Rackspace during the first quarter included Paul Hondros’ AlphaOne Capital Partners, which purchased 120,400 shares of the company.

Tableau Software Inc (NYSE:DATA)

 – Investors with long positions (as of March 31) : 34

 – Aggregate value of investors’ holdings (as of March 31): $830.62 Million

With the company losing more than half of its market capitalization during the first quarter, it isn’t a surprise that Tableau Software Inc (NYSE:DATA) saw a significant decline in its popularity during that period. The number of funds in our system that held a stake in Tableau Software Inc (NYSE:DATA) dropped by nine and the aggregate value of their holdings in it dropped by 42% during the January-to-March period. Funds that sold off their entire stake in the company during that time included D.E. Shaw, founded by David E. Shaw, and Sheetal Duggal‘s Thrax Management. On May 5, the company reported its first quarter results, declaring EPS of $0.33 on revenue of $202.80 million, narrowly topping estimates of EPS of $0.31 on revenue of $200.89 million. Despite those better-than-expected quarterly numbers, Tableau’s stock has failed to recover significantly from its first quarter collapse and currently trades down by 47% year-to-date. On May 9, analysts at Jeffries Group reiterated their ‘Hold’ rating on the stock while lowering their price target on it to $56 from $65.

Disclosure: None