Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in CrowdStrike Holdings, Inc. (NASDAQ:CRWD)? The smart money sentiment can provide an answer to this question.
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) investors should be aware of a decrease in hedge fund interest of late. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) was in 66 hedge funds’ portfolios at the end of June. The all time high for this statistic is 92. Our calculations also showed that CRWD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Daniel Sundheim of D1 Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a gander at the latest hedge fund action regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD).
Do Hedge Funds Think CRWD Is A Good Stock To Buy Now?
At Q2’s end, a total of 66 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CRWD over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Tiger Global Management LLC held the most valuable stake in CrowdStrike Holdings, Inc. (NASDAQ:CRWD), which was worth $1894.1 million at the end of the second quarter. On the second spot was Matrix Capital Management which amassed $753.9 million worth of shares. Whale Rock Capital Management, D E Shaw, and Coatue Management 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 Isomer Partners allocated the biggest weight to CrowdStrike Holdings, Inc. (NASDAQ:CRWD), around 14.9% of its 13F portfolio. Matrix Capital Management is also relatively very bullish on the stock, dishing out 8.24 percent of its 13F equity portfolio to CRWD.
Judging by the fact that CrowdStrike Holdings, Inc. (NASDAQ:CRWD) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that elected to cut their full holdings by the end of the second quarter. Interestingly, Catherine D. Wood’s ARK Investment Management sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $61 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund sold off about $31.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 11 funds by the end of the second quarter.
Let’s also examine hedge fund activity in other stocks similar to CrowdStrike Holdings, Inc. (NASDAQ:CRWD). These stocks are NXP Semiconductors NV (NASDAQ:NXPI), Honda Motor Co Ltd (NYSE:HMC), Global Payments Inc (NYSE:GPN), Twitter Inc (NYSE:TWTR), Banco Bradesco SA (NYSE:BBD), DocuSign, Inc. (NASDAQ:DOCU), and Freeport-McMoRan Inc. (NYSE:FCX). All of these stocks’ market caps are closest to CRWD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NXPI | 52 | 1336949 | -1 |
| HMC | 10 | 374945 | -2 |
| GPN | 66 | 4858185 | 4 |
| TWTR | 89 | 6031488 | -18 |
| BBD | 18 | 362308 | -1 |
| DOCU | 58 | 4610698 | -2 |
| FCX | 76 | 3869626 | 8 |
| Average | 52.7 | 3063457 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 52.7 hedge funds with bullish positions and the average amount invested in these stocks was $3063 million. That figure was $7267 million in CRWD’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 10 bullish hedge fund positions. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CRWD is 51. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately CRWD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CRWD were disappointed as the stock returned 0.8% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
