“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Slack Technologies Inc (NYSE:WORK) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is Slack Technologies Inc (NYSE:WORK) a cheap investment today? The smart money is taking a pessimistic view. The number of bullish hedge fund bets shrunk by 10 in recent months. Our calculations also showed that WORK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Glen Kacher of Light Street Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the recent hedge fund action surrounding Slack Technologies Inc (NYSE:WORK).
How have hedgies been trading Slack Technologies Inc (NYSE:WORK)?
At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards WORK over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Light Street Capital held the most valuable stake in Slack Technologies Inc (NYSE:WORK), which was worth $115.9 million at the end of the third quarter. On the second spot was 12 West Capital Management which amassed $36.9 million worth of shares. Tiger Global Management, Lomas Capital Management, and Bridger Management 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 General Equity Partners allocated the biggest weight to Slack Technologies Inc (NYSE:WORK), around 10.66% of its portfolio. Light Street Capital is also relatively very bullish on the stock, setting aside 8.31 percent of its 13F equity portfolio to WORK.
Since Slack Technologies Inc (NYSE:WORK) has experienced declining sentiment from the smart money, it’s easy to see that there exists a select few money managers that slashed their positions entirely last quarter. It’s worth mentioning that Andreas Halvorsen’s Viking Global cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $170.2 million in stock. Sculptor Capital, also sold off its stock, about $82.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 10 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Slack Technologies Inc (NYSE:WORK) but similarly valued. We will take a look at Gartner Inc (NYSE:IT), Cboe Global Markets, Inc. (NASDAQ:CBOE), Agnico Eagle Mines Limited (NYSE:AEM), and Annaly Capital Management, Inc. (NYSE:NLY). All of these stocks’ market caps are similar to WORK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IT | 19 | 659624 | 2 |
| CBOE | 23 | 1076442 | -1 |
| AEM | 30 | 382337 | 4 |
| NLY | 15 | 97109 | -6 |
| Average | 21.75 | 553878 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $554 million. That figure was $326 million in WORK’s case. Agnico Eagle Mines Limited (NYSE:AEM) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 15 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. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately WORK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WORK were disappointed as the stock returned -3.8% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
