Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to CommVault Systems, Inc. (NASDAQ:CVLT) changed recently.
CommVault Systems, Inc. (NASDAQ:CVLT) shareholders have witnessed an increase in enthusiasm from smart money in recent months. CVLT was in 24 hedge funds’ portfolios at the end of the third quarter of 2019. There were 19 hedge funds in our database with CVLT holdings at the end of the previous quarter. Our calculations also showed that CVLT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are perceived as worthless, outdated investment tools of yesteryear. While there are greater than 8000 funds in operation at present, We choose to focus on the upper echelon of this group, approximately 750 funds. It is estimated that this group of investors manage the majority of the hedge fund industry’s total asset base, and by following their highest performing equity investments, Insider Monkey has revealed a few investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jeffrey Bronchick of Cove Street Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s view the key hedge fund action regarding CommVault Systems, Inc. (NASDAQ:CVLT).
Hedge fund activity in CommVault Systems, Inc. (NASDAQ:CVLT)
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CVLT over the last 17 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in CommVault Systems, Inc. (NASDAQ:CVLT), which was worth $98.4 million at the end of the third quarter. On the second spot was D E Shaw which amassed $44.1 million worth of shares. AQR Capital Management, Citadel Investment Group, and Two Sigma Advisors 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 Cove Street Capital allocated the biggest weight to CommVault Systems, Inc. (NASDAQ:CVLT), around 1.85% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, setting aside 1.23 percent of its 13F equity portfolio to CVLT.
As aggregate interest increased, key money managers have been driving this bullishness. Cove Street Capital, managed by Jeffrey Bronchick, initiated the biggest position in CommVault Systems, Inc. (NASDAQ:CVLT). Cove Street Capital had $13.2 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $9.6 million position during the quarter. The following funds were also among the new CVLT investors: Michael Doheny’s Freshford Capital Management, Sander Gerber’s Hudson Bay Capital Management, and Minhua Zhang’s Weld Capital Management.
Let’s go over 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 Tellurian Inc. (NASDAQ:TELL), Cambrex Corporation (NYSE:CBM), Kontoor Brands, Inc. (NYSE:KTB), and Acushnet Holdings Corp. (NYSE:GOLF). 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 |
|---|---|---|---|
| TELL | 14 | 52629 | 5 |
| CBM | 17 | 153556 | 5 |
| KTB | 21 | 70588 | 8 |
| GOLF | 12 | 21329 | 1 |
| Average | 16 | 74526 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $297 million in CVLT’s case. Kontoor Brands, Inc. (NYSE:KTB) is the most popular stock in this table. On the other hand Acushnet Holdings Corp. (NYSE:GOLF) is the least popular one with only 12 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on CVLT as the stock returned 13.2% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
