The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Elastic N.V. (NYSE:ESTC) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is Elastic N.V. (NYSE:ESTC) a buy here? Money managers were getting more optimistic. The number of long hedge fund positions inched up by 10 recently. Elastic N.V. (NYSE:ESTC) was in 43 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 39. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ESTC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chase Coleman of Tiger Global
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 new hedge fund action surrounding Elastic N.V. (NYSE:ESTC).
How have hedgies been trading Elastic N.V. (NYSE:ESTC)?
At the end of June, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ESTC over the last 20 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Sylebra Capital Management held the most valuable stake in Elastic N.V. (NYSE:ESTC), which was worth $537 million at the end of the third quarter. On the second spot was Tiger Global Management LLC which amassed $370.7 million worth of shares. D1 Capital Partners, Alkeon Capital Management, and Black-and-White Capital 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 Marcho Partners allocated the biggest weight to Elastic N.V. (NYSE:ESTC), around 20.12% of its 13F portfolio. Sylebra Capital Management is also relatively very bullish on the stock, designating 16.73 percent of its 13F equity portfolio to ESTC.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. D1 Capital Partners, managed by Daniel Sundheim, created the largest position in Elastic N.V. (NYSE:ESTC). D1 Capital Partners had $64.4 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $25.7 million investment in the stock during the quarter. The other funds with brand new ESTC positions are Alok Agrawal’s Bloom Tree Partners, Ken Griffin’s Citadel Investment Group, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s also examine hedge fund activity in other stocks similar to Elastic N.V. (NYSE:ESTC). We will take a look at Tenaris S.A. (NYSE:TS), Weibo Corp (NASDAQ:WB), Host Hotels and Resorts Inc (NYSE:HST), A. O. Smith Corporation (NYSE:AOS), Juniper Networks, Inc. (NYSE:JNPR), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), and Perrigo Company (NASDAQ:PRGO). This group of stocks’ market values resemble ESTC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TS | 12 | 204534 | -3 |
| WB | 14 | 92970 | 4 |
| HST | 29 | 221044 | 5 |
| AOS | 35 | 410037 | 10 |
| JNPR | 33 | 558592 | -1 |
| ACAD | 44 | 2839807 | 16 |
| PRGO | 33 | 446972 | 5 |
| Average | 28.6 | 681994 | 5.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $682 million. That figure was $1386 million in ESTC’s case. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 12 bullish hedge fund positions. Elastic N.V. (NYSE:ESTC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ESTC is 88.4. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on ESTC, though not to the same extent, as the stock returned 17.8% since the end of June and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
