The Insider Monkey team tracks the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help investors generate above-market returns. Of course, we are not the only ones in the finance space who stumbled upon this phenomenon. For instance, equity strategists at Goldman Sachs compiled the Hedge Fund VIP list, which comprises the 50 most-owned stocks among hedge funds. Fresh news stories reveal that Goldman’s so-called VIP list outperformed the S&P 500 Index on a quarterly basis 64% of the time since 2001 through the end of 2015. It should be noted that this basket of stocks has been lagging behind broader market benchmarks so far in 2016, but there is good reason to believe that hedge funds’ high-conviction ideas tend to beat benchmarks. For that reason, the following article will examine the hedge fund sentiment towards salesforce.com inc. (NYSE:CRM).
salesforce.com inc. (NYSE:CRM) has experienced an increase in activity from the world’s largest hedge funds lately. At the end of this article we will also compare CRM to other stocks including ING Groep N.V. (ADR) (NYSE:ING), Sumitomo Mitsui Financial Grp, Inc. (ADR) (NYSE:SMFG), and HDFC Bank Limited (ADR) (NYSE:HDB) to get a better sense of its popularity.
Follow Salesforce Inc. (NYSE:CRM)
Follow Salesforce Inc. (NYSE:CRM)
In the eyes of most shareholders, hedge funds are seen as slow, old investment vehicles of yesteryear. While there are more than 8000 funds in operation at the moment, Our experts choose to focus on the aristocrats of this club, around 700 funds. These money managers shepherd bulk of the hedge fund industry’s total capital, and by keeping track of their matchless equity investments, Insider Monkey has formulated a number of investment strategies that have historically defeated the broader indices. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
salesforce.com inc. (NYSE:CRM), a leading provider of enterprise cloud computing solutions, has been growing at a solid pace in the past several years both organically and through acquisitions of machine learnings and data analysis start-ups. The shares of the developer of cloud-based business software have advanced by 7% over the past 52 weeks despite having lost 10% since the beginning of 2016. The company offers enterprise cloud computing solutions, including apps and platform services, along with services that assist the adoption of those solutions. Its offerings enable companies to grow top-line figures, provide customer service on multiple devices and channels, among other things. salesforce.com inc. (NYSE:CRM)’s total revenues have been growing at a strong rate in the past several years. The company generated total revenues of $6.67 billion during fiscal 2016 that ended January 31, up from $5.37 billion generated in fiscal 2015, $4.07 billion in fiscal 2014, and $3.05 in fiscal 2013. salesforce.com inc. (NYSE:CRM)’s subscription and support revenues for fiscal 2016 (accounted for 93% of total revenues) were $6.21 billion, which increased approximately $1.2 billion or 24% year-on-year. The increase was mainly driven by volume-driven increases from new business, which involved new customers, upgrades and additional subscriptions from its existing customers. The company has also been successful in reducing its customer attrition, which also positively impacted subscription and support revenues.
Now, we’re going to view the fresh action encompassing salesforce.com inc. (NYSE:CRM), as well as reveal some recent thoughts of one Morgan Stanley analyst on salesforce.
Keith Weiss, a software analyst at Morgan Stanley, recently reiterated his positive views on salesforce.com inc. (NYSE:CRM) after going through the presentation of one salesforce executive, who participated in the Morgan Stanley Technology, Media & Telecom conference at the end of February 2016. The analyst said that customer demand for applications continues to remain quite strong and salesforce is well-positioned to make the most of this development:
“Having built a robust set of solutions around marketing to, acquiring, and servicing customers, Salesforce.com represents the best positioned name in our group for this trend. Top line growth has been bolstered by a more strategic selling motion implemented by Keith Block, as well as a quickly expanding partner ecosystem developing new functionality on top Salesforce.com’s Platform – as seen in the 28% YoY billings growth in the recent FY4Q16. These points, coupled with a solid framework for continued margin expansion, which CFO Mark Hawkins again spoke to at the conference, leads to sustainable 30%+ FCF growth ahead for CRM, in our view.”
How are hedge funds trading salesforce.com inc. (NYSE:CRM)?
Heading into 2016, a total of 61 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 9% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the most valuable position in salesforce.com inc. (NYSE:CRM), worth close to $222.6 million, accounting for 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Criterion Capital, led by Christopher Lord, holding a $211.7 million position; 6.6% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism consist of Frank Slattery’s Symmetry Peak Management, Israel Englander’s Millennium Management and James Dondero’s Highland Capital Management.
Now, key hedge funds were breaking ground themselves. OZ Management, managed by Daniel S. Och, assembled the most valuable call position in salesforce.com inc. (NYSE:CRM). OZ Management had $93 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $43 million position during the quarter. The following funds were also among the new CRM investors: Sheetal Duggal’s Thrax Management, Solomon Kumin’s Folger Hill Asset Management, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.
The final page of this article covers the Q4 hedge fund activity in several other companies with market capitalizations similar to the one of salesforce.com inc. (NYSE:CRM).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as salesforce.com inc. (NYSE:CRM) but similarly valued. These stocks are ING Groep N.V. (ADR) (NYSE:ING), Sumitomo Mitsui Financial Grp, Inc. (ADR) (NYSE:SMFG), HDFC Bank Limited (ADR) (NYSE:HDB), and Time Warner Inc (NYSE:TWX). This group of stocks’ market caps are closest to CRM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ING | 6 | 17163 | -7 |
| SMFG | 11 | 23537 | -3 |
| HDB | 23 | 1417465 | -6 |
| TWX | 72 | 3527415 | 3 |
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1.25 billion. That figure was $1.96 billion in CRM’s case. Time Warner Inc (NYSE:TWX) is the most popular stock in this table. On the other hand ING Groep N.V. (ADR) (NYSE:ING) is the least popular one with only 6 bullish hedge fund positions. salesforce.com inc. (NYSE:CRM) 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. In this regard TWX might be a better candidate to consider a long position.
Disclosure: None
