The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 18.7% through May 30th, vs. a gain of 12.1% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards CommVault Systems, Inc. (NASDAQ:CVLT), and what that likely means for the prospects of the company and its stock.
Is CommVault Systems, Inc. (NASDAQ:CVLT) a sound investment now? Prominent investors are in a bullish mood. The number of bullish hedge fund bets advanced by 6 lately. Our calculations also showed that cvlt isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s check out the key hedge fund action regarding CommVault Systems, Inc. (NASDAQ:CVLT).
How have hedgies been trading CommVault Systems, Inc. (NASDAQ:CVLT)?
At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in CVLT a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of CommVault Systems, Inc. (NASDAQ:CVLT), with a stake worth $120.4 million reported as of the end of March. Trailing Renaissance Technologies was Elliott Management, which amassed a stake valued at $58 million. AQR Capital Management, D E Shaw, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. SG Capital Management, managed by Ken Grossman and Glen Schneider, assembled the largest call position in CommVault Systems, Inc. (NASDAQ:CVLT). SG Capital Management had $6.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $2.2 million position during the quarter. The other funds with brand new CVLT positions are Benjamin A. Smith’s Laurion Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Bruce Kovner’s Caxton Associates LP.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CommVault Systems, Inc. (NASDAQ:CVLT) but similarly valued. We will take a look at Tenet Healthcare Corp (NYSE:THC), Helen of Troy Limited (NASDAQ:HELE), Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB), and South Jersey Industries Inc (NYSE:SJI). This group of stocks’ market values are similar to CVLT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THC | 24 | 916260 | -11 |
| HELE | 21 | 175337 | 4 |
| HOMB | 15 | 29568 | 5 |
| SJI | 11 | 60289 | -1 |
| Average | 17.75 | 295364 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $295 million. That figure was $390 million in CVLT’s case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand South Jersey Industries Inc (NYSE:SJI) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks CommVault Systems, Inc. (NASDAQ:CVLT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CVLT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CVLT were disappointed as the stock returned -27.8% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
