Is Splunk Inc (SPLK) Going to Burn These Hedge Funds?

In this article we will analyze whether Splunk Inc (NASDAQ:SPLK) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Hedge fund interest in Splunk Inc (NASDAQ:SPLK) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SPLK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Tractor Supply Company (NASDAQ:TSCO), Fox Corporation (NASDAQ:FOXA), and DISH Network Corp. (NASDAQ:DISH) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s take a peek at the fresh hedge fund action surrounding Splunk Inc (NASDAQ:SPLK).

Bill Miller of Miller Value Partners

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

At the end of September, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2021. By comparison, 44 hedge funds held shares or bullish call options in SPLK a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of Splunk Inc (NASDAQ:SPLK), with a stake worth $256.8 million reported as of the end of September. Trailing Citadel Investment Group was Holocene Advisors, which amassed a stake valued at $196.6 million. Newbrook Capital Advisors, Citadel Investment Group, and Miller Value Partners 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 Anatole Investment Management allocated the biggest weight to Splunk Inc (NASDAQ:SPLK), around 9.05% of its 13F portfolio. Newbrook Capital Advisors is also relatively very bullish on the stock, designating 8.56 percent of its 13F equity portfolio to SPLK.

Due to the fact that Splunk Inc (NASDAQ:SPLK) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds who were dropping their entire stakes last quarter. At the top of the heap, Renaissance Technologies said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, comprising close to $40.6 million in stock. Joseph Samuels’s fund, Islet Management, also dropped its stock, about $21.7 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Splunk Inc (NASDAQ:SPLK) but similarly valued. We will take a look at Tractor Supply Company (NASDAQ:TSCO), Fox Corporation (NASDAQ:FOXA), DISH Network Corp. (NASDAQ:DISH), Verisign, Inc. (NASDAQ:VRSN), Huntington Bancshares Incorporated (NASDAQ:HBAN), ORIX Corporation (NYSE:IX), and Invitation Homes Inc. (NYSE:INVH). All of these stocks’ market caps match SPLK’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $1543 million. That figure was $1251 million in SPLK’s case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. Splunk Inc (NASDAQ:SPLK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SPLK is 79.5. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately SPLK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SPLK were disappointed as the stock returned -16.4% since the end of September (through 11/30) 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.