Proofpoint Inc (PFPT), Cornerstone OnDemand, Inc. (CSOD) & Two Other Stocks: Was This Fund Right to Bet on Them?

Investors are growing bearish on hedge funds due to sloppy performance and high fees, but our research proves that long sides of the smart money’s portfolio always return optimistic gains.  For example, in the third quarter, 627 hedge funds tracked by Insider Monkey which had at least five long positions in companies valued at $1 billion or more returned 8.3% on average, a full 5.0 percentage points more than S&P 500 ETFs.

We think that investors can beat the market if they follow top picks of hedge funds, which is why we are going to discuss top four tech picks that were in the portfolio of Dennis Puri and Oliver Keller‘s Hunt Lane Capital at the end of June. These stocks are Proofpoint Inc (NASDAQ:PFPT), Cornerstone OnDemand, Inc. (NASDAQ:CSOD),  Electronic Arts Inc. (NASDAQ:EA), and Commscope Holding Company Inc (NASDAQ:COMM).

Hunt Lane Capital, managed by Dennis Puri and Oliver Keller had an equity portfolio whose value declined to $191.65 million from $307.96 million in the third quarter. According to  our calculations, the fund’s 11 long positions in companies that were worth at least $1 billion, returned 15.15% in the third quarter. Our measurements of the fund’s perfomance may be different from the actual returns since we exclude short positions, holdings in small-cap companies, and investments in other instruments. Nevertheless, these measurements still offer a great tool for examining the fund’s investment skills, which is why we are going to take a closer look its positions in the above-mentioned companies and see what kind of returns they brought in the third quarter.

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Let’s begin with Proofpoint Inc (NASDAQ:PFPT), in which Hunt Lane Capital had lowered its stake by 26% to 592,000 shares worth $37.35 million in the second quarter. In the following three months, amid an 18.6% growth registered by the stock, the fund sold out the entire position in the company. A total of 20 funds tracked by Insider Monkey were long Proofpoint at the end of June, down by 9% from one quarter earlier. Among these funds, Jericho Capital Asset Management held the most valuable stake in Proofpoint Inc (NASDAQ:PFPT), which was worth $93 million at the end of the second quarter. Moreover, Polar Capital, Columbus Circle Investors, and Light Street Capital were also bullish on Proofpoint Inc (NASDAQ:PFPT).

Another position that Hund Lane Capital closed last quarter was the one in Cornerstone OnDemand, Inc. (NASDAQ:CSOD), in which had held 874,000 shares valued at $33.36 million at the end of June. The stock gained 20.7% in the third quarter. The number of funds from our database long Cornerstone OnDemand went up by 17% to 27 during the second quarter. More specifically, Tensile Capital was the largest shareholder of Cornerstone OnDemand, Inc. (NASDAQ:CSOD), with a stake worth $70 million reported as of the end of June. Trailing Tensile Capital was RGM Capital, which amassed a stake valued at $60.7 million. Citadel Investment Group, and Glenhill Advisors also held valuable positions in the company.

We can say Hunt Lane Capital made a really great addition to its equity portfolio in the June quarter, as it acquired 359,000 shares of Electronic Arts Inc. (NASDAQ:EA), because the company’s stock advanced by 12.7% in the third quarter. As the fund left the stake unchanged between July and September, the value of the position increased to $30.66 million from $27.2 million. Heading into the third quarter of 2016, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% sequentially. Coatue Management was the largest shareholder of Electronic Arts Inc. (NASDAQ:EA), with a stake worth $358.3 million reported as of the end of June. Trailing Coatue Management was Lone Pine Capital, which amassed a stake valued at $269.4 million. Citadel Investment Group, Two Sigma Advisors, and Renaissance Technologies also held valuable positions in the company.

The only stock in today’s article that declined by 3% in the third quarter, is Commscope Holding Company Inc (NASDAQ:COMM). However, after having boosted the stake by 203% in the June quarter, the fund further increased it by 11% to 797,000 shares worth $24.0 million during the third quarter. During the second quarter, the number of funds followed by our team that held long positions in Commscope Holding Company went up by 31% to 47. Among these funds, Chieftain Capital held the most valuable stake in Commscope Holding Company Inc (NASDAQ:COMM), which was worth $476.5 million at the end of the second quarter. On the second spot was Maverick Capital, which amassed $47 million worth of shares. Moreover, FPR Partners, Route One Investment Company, and Corvex Capital were also bullish on Commscope Holding Company Inc (NASDAQ:COMM).

Disclosure: None