Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
Tenable Holdings, Inc. (NASDAQ:TENB) investors should be aware of an increase in hedge fund interest of late. Our calculations also showed that TENB isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
Paul Marshall of Marshall Wace
We’re going to review the key hedge fund action surrounding Tenable Holdings, Inc. (NASDAQ:TENB).
What does the smart money think about Tenable Holdings, Inc. (NASDAQ:TENB)?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in TENB a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Tenable Holdings, Inc. (NASDAQ:TENB) was held by Sylebra Capital Management, which reported holding $62.5 million worth of stock at the end of March. It was followed by Millennium Management with a $24 million position. Other investors bullish on the company included Marshall Wace LLP, Parian Global Management, and Alta Park Capital.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in Tenable Holdings, Inc. (NASDAQ:TENB). Marshall Wace LLP had $14.6 million invested in the company at the end of the quarter. Zachary Miller’s Parian Global Management also initiated a $6.5 million position during the quarter. The other funds with brand new TENB positions are Tor Minesuk’s Mondrian Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and D. E. Shaw’s D E Shaw.
Let’s now review hedge fund activity in other stocks similar to Tenable Holdings, Inc. (NASDAQ:TENB). We will take a look at Houlihan Lokey Inc (NYSE:HLI), Magnolia Oil & Gas Corporation (NYSE:MGY), Patterson-UTI Energy, Inc. (NASDAQ:PTEN), and Balchem Corporation (NASDAQ:BCPC). All of these stocks’ market caps are similar to TENB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HLI | 14 | 132102 | -4 |
| MGY | 32 | 232014 | 0 |
| PTEN | 34 | 301384 | -5 |
| BCPC | 7 | 63045 | -4 |
| Average | 21.75 | 182136 | -3.25 |
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 $182 million. That figure was $154 million in TENB’s case. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is the most popular stock in this table. On the other hand Balchem Corporation (NASDAQ:BCPC) is the least popular one with only 7 bullish hedge fund positions. Tenable Holdings, Inc. (NASDAQ:TENB) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 TENB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TENB investors were disappointed as the stock returned -11.7% during the same time 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
