We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Cloudera, Inc. (NYSE:CLDR).
Cloudera, Inc. (NYSE:CLDR) has experienced a decrease in hedge fund sentiment of late. Our calculations also showed that CLDR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Carl Icahn of Icahn Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the new hedge fund action surrounding Cloudera, Inc. (NYSE:CLDR).
Hedge fund activity in Cloudera, Inc. (NYSE:CLDR)
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CLDR over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Icahn Capital LP was the largest shareholder of Cloudera, Inc. (NYSE:CLDR), with a stake worth $637.3 million reported as of the end of September. Trailing Icahn Capital LP was RGM Capital, which amassed a stake valued at $73.2 million. Citadel Investment Group, Raging Capital Management, and Renaissance Technologies 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 RGM Capital allocated the biggest weight to Cloudera, Inc. (NYSE:CLDR), around 4.19% of its 13F portfolio. Raging Capital Management is also relatively very bullish on the stock, dishing out 3.4 percent of its 13F equity portfolio to CLDR.
Since Cloudera, Inc. (NYSE:CLDR) has faced declining sentiment from the smart money, we can see that there is a sect of hedge funds that slashed their entire stakes heading into Q4. Interestingly, Mark Coe’s Intrinsic Edge Capital sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, totaling about $10.5 million in stock, and Philip Hempleman’s Ardsley Partners was right behind this move, as the fund sold off about $4.8 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 5 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Cloudera, Inc. (NYSE:CLDR) but similarly valued. These stocks are Hutchison China MediTech Limited (NASDAQ:HCM), Boyd Gaming Corporation (NYSE:BYD), Itron, Inc. (NASDAQ:ITRI), and Sinopec Shanghai Petrochemical Co. (NYSE:SHI). This group of stocks’ market caps are similar to CLDR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HCM | 7 | 20419 | -5 |
| BYD | 30 | 216098 | 3 |
| ITRI | 21 | 456240 | -4 |
| SHI | 3 | 14883 | -1 |
| Average | 15.25 | 176910 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $810 million in CLDR’s case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Co. (NYSE:SHI) is the least popular one with only 3 bullish hedge fund positions. Cloudera, Inc. (NYSE:CLDR) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately CLDR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CLDR were disappointed as the stock returned -31.6% 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
