The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article we look at what those investors think of New Relic Inc (NYSE:NEWR).
New Relic Inc (NYSE:NEWR) was in 27 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 44. NEWR has experienced a decrease in hedge fund sentiment of late. There were 30 hedge funds in our database with NEWR holdings at the end of December. Our calculations also showed that NEWR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Ricky Sandler of Eminence Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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 we’re going to take a glance at the latest hedge fund action regarding New Relic Inc (NYSE:NEWR).
Do Hedge Funds Think NEWR Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in NEWR a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, HMI Capital, managed by Mick Hellman, holds the biggest position in New Relic Inc (NYSE:NEWR). HMI Capital has a $323.3 million position in the stock, comprising 11.5% of its 13F portfolio. The second largest stake is held by Eminence Capital, led by Ricky Sandler, holding a $318.8 million position; 3.9% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism encompass David Goel and Paul Ferri’s Matrix Capital Management, Constantinos J. Christofilis’s Archon Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position HMI Capital allocated the biggest weight to New Relic Inc (NYSE:NEWR), around 11.53% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, designating 7.45 percent of its 13F equity portfolio to NEWR.
Because New Relic Inc (NYSE:NEWR) has faced falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of funds that slashed their entire stakes last quarter. At the top of the heap, Barry Rosenstein’s JANA Partners cut the largest stake of the 750 funds monitored by Insider Monkey, worth an estimated $23.2 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $6.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as New Relic Inc (NYSE:NEWR) but similarly valued. We will take a look at EnerSys (NYSE:ENS), Umpqua Holdings Corp (NASDAQ:UMPQ), Brighthouse Financial, Inc. (NASDAQ:BHF), Glaukos Corporation (NYSE:GKOS), Spire Inc. (NYSE:SR), New Jersey Resources Corp (NYSE:NJR), and Legend Biotech Corporation (NASDAQ:LEGN). This group of stocks’ market caps match NEWR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENS | 28 | 119582 | 4 |
| UMPQ | 25 | 245140 | 2 |
| BHF | 28 | 539727 | -5 |
| GKOS | 18 | 47095 | 5 |
| SR | 9 | 20905 | -6 |
| NJR | 12 | 26762 | -1 |
| LEGN | 12 | 315484 | -1 |
| Average | 18.9 | 187814 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $1142 million in NEWR’s case. EnerSys (NYSE:ENS) is the most popular stock in this table. On the other hand Spire Inc. (NYSE:SR) is the least popular one with only 9 bullish hedge fund positions. New Relic Inc (NYSE:NEWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEWR is 67.8. 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 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 July 9th and beat the market again by 6.7 percentage points. Unfortunately NEWR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NEWR were disappointed as the stock returned 10% since the end of March (through 7/9) 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 many of these stocks already outperformed the market since 2019.
Follow New Relic Inc. (NYSE:NEWR)
Follow New Relic Inc. (NYSE:NEWR)
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Disclosure: None. This article was originally published at Insider Monkey.
