Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 30 stock picks outperformed the S&P 500 Index by 4 percentage points through the middle of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Is MongoDB, Inc. (NASDAQ:MDB) an exceptional investment right now? Hedge funds are becoming more confident. The number of long hedge fund bets rose by 2 lately. Our calculations also showed that MDB isn’t among the 30 most popular stocks among hedge funds. MDB was in 21 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with MDB positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a gander at the recent hedge fund action encompassing MongoDB, Inc. (NASDAQ:MDB).
Hedge fund activity in MongoDB, Inc. (NASDAQ:MDB)
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2018. By comparison, 17 hedge funds held shares or bullish call options in MDB heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Whale Rock Capital Management was the largest shareholder of MongoDB, Inc. (NASDAQ:MDB), with a stake worth $312.4 million reported as of the end of September. Trailing Whale Rock Capital Management was SCGE Management, which amassed a stake valued at $85.8 million. Tiger Global Management LLC, SQN Investors, and Corvex Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, some big names have jumped into MongoDB, Inc. (NASDAQ:MDB) headfirst. SQN Investors, managed by Amish Mehta, initiated the largest position in MongoDB, Inc. (NASDAQ:MDB). SQN Investors had $49.3 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $34.6 million investment in the stock during the quarter. The other funds with brand new MDB positions are Andrew Sandler’s Sandler Capital Management, Christopher James’s Partner Fund Management, and Brad Farber’s Atika Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as MongoDB, Inc. (NASDAQ:MDB) but similarly valued. These stocks are Perspecta Inc. (NYSE:PRSP), Range Resources Corp. (NYSE:RRC), Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), and Paylocity Holding Corp (NASDAQ:PCTY). This group of stocks’ market caps are closest to MDB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRSP | 42 | 731268 | -8 |
| RRC | 29 | 1434168 | 4 |
| TKC | 8 | 12928 | 0 |
| PCTY | 22 | 203032 | 1 |
| Average | 25.25 | 595349 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $595 million. That figure was $689 million in MDB’s case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 8 bullish hedge fund positions. MongoDB, Inc. (NASDAQ:MDB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PRSP might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
