Hedge Funds Aren’t Crazy About Guidewire Software Inc (GWRE) Anymore

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Guidewire Software Inc (NYSE:GWRE).

Guidewire Software Inc (NYSE:GWRE) has seen a decrease in support from the world’s most elite money managers of late. Guidewire Software Inc (NYSE:GWRE) was in 26 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 35. There were 27 hedge funds in our database with GWRE positions at the end of the second quarter. Our calculations also showed that GWRE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to analyze the latest hedge fund action surrounding Guidewire Software Inc (NYSE:GWRE).

David Blood of Generation Investment Management

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

Heading into the fourth quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in GWRE over the last 25 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

More specifically, Stockbridge Partners was the largest shareholder of Guidewire Software Inc (NYSE:GWRE), with a stake worth $613.4 million reported as of the end of September. Trailing Stockbridge Partners was Darsana Capital Partners, which amassed a stake valued at $297.2 million. Generation Investment Management, Skye Global Management, and Route One Investment Company were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Anabranch Capital allocated the biggest weight to Guidewire Software Inc (NYSE:GWRE), around 21.36% of its 13F portfolio. Stockbridge Partners is also relatively very bullish on the stock, designating 12.64 percent of its 13F equity portfolio to GWRE.

Since Guidewire Software Inc (NYSE:GWRE) has witnessed declining sentiment from hedge fund managers, we can see that there exists a select few fund managers that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dumped the biggest position of all the hedgies monitored by Insider Monkey, totaling close to $25.7 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund sold off about $7.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Guidewire Software Inc (NYSE:GWRE) but similarly valued. We will take a look at Hill-Rom Holdings, Inc. (NYSE:HRC), Intellia Therapeutics, Inc. (NASDAQ:NTLA), Levi Strauss & Co. (NYSE:LEVI), Chegg Inc (NYSE:CHGG), Hubbell Incorporated (NYSE:HUBB), Wynn Resorts, Limited (NASDAQ:WYNN), and CubeSmart (NYSE:CUBE). This group of stocks’ market values are similar to GWRE’s market value.

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As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $693 million. That figure was $2006 million in GWRE’s case. Hill-Rom Holdings, Inc. (NYSE:HRC) is the most popular stock in this table. On the other hand Hubbell Incorporated (NYSE:HUBB) is the least popular one with only 18 bullish hedge fund positions. Guidewire Software Inc (NYSE:GWRE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GWRE is 40.6. 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 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately GWRE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); GWRE investors were disappointed as the stock returned -4.1% since the end of September (through 12/9) 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 most of these stocks already outperformed the market in 2021.

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