Is CHKP Stock A Buy or Sell?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Check Point Software Technologies Ltd. (NASDAQ:CHKP) to find out whether there were any major changes in hedge funds’ views.

Is CHKP stock a buy? Check Point Software Technologies Ltd. (NASDAQ:CHKP) has experienced a decrease in support from the world’s most elite money managers in recent months. Check Point Software Technologies Ltd. (NASDAQ:CHKP) was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 35. There were 27 hedge funds in our database with CHKP holdings at the end of September. Our calculations also showed that CHKP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

To the average investor there are a lot of metrics shareholders can use to evaluate stocks. A pair of the less utilized metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform the S&P 500 by a very impressive amount (see the details here).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to view the fresh hedge fund action encompassing Check Point Software Technologies Ltd. (NASDAQ:CHKP).

Do Hedge Funds Think CHKP Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CHKP over the last 22 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ako Capital, managed by Nicolai Tangen, holds the number one position in Check Point Software Technologies Ltd. (NASDAQ:CHKP). Ako Capital has a $187.9 million position in the stock, comprising 2.4% of its 13F portfolio. On Ako Capital’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $152.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other peers that hold long positions contain Ken Griffin’s Citadel Investment Group,  Renaissance Technologies and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Fairpointe Capital allocated the biggest weight to Check Point Software Technologies Ltd. (NASDAQ:CHKP), around 3.16% of its 13F portfolio. Ako Capital is also relatively very bullish on the stock, earmarking 2.42 percent of its 13F equity portfolio to CHKP.

Judging by the fact that Check Point Software Technologies Ltd. (NASDAQ:CHKP) has witnessed a decline in interest from hedge fund managers, logic holds that there was a specific group of money managers who were dropping their full holdings last quarter. Intriguingly, Terry Smith’s Fundsmith LLP dropped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at close to $40.3 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund sold off about $13.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Check Point Software Technologies Ltd. (NASDAQ:CHKP). These stocks are SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), Restaurant Brands International Inc (NYSE:QSR), Smith & Nephew plc (NYSE:SNN), Amcor plc (NYSE:AMCR), Ventas, Inc. (NYSE:VTR), Xylem Inc (NYSE:XYL), and DraftKings Inc. (NASDAQ:DKNG). This group of stocks’ market caps resemble CHKP’s market cap.

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As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $946 million. That figure was $775 million in CHKP’s case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 12 bullish hedge fund positions. Check Point Software Technologies Ltd. (NASDAQ:CHKP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHKP is 45.2. 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. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately CHKP wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); CHKP investors were disappointed as the stock returned -10.3% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.