In a declining market, where the Dow and S&P 500 have been trading in red for the last several days, one of the stocks that can be considered a winner is salesforce.com, inc. (NYSE:CRM), even though it inched up by less than 2% today. The company gained ground after disclosing better-than-expected results for the second quarter of fiscal 2016 ended July 31. Salesforce delivered a 24% annual increase in revenue to $1.63 billion and non-GAAP earnings of $0.19, up from $0.13 a year earlier. The results also came above revenue estimates of $1.6 billion and earnings expectations of $0.18 per share.
Another reason for the stock’s appreciation was the increased guidance provided by the company, which now expects revenue between $1.69 billion and $1.70 billion for the third quarter, which represents a 22%-23% increase on the year, while non-GAAP EPS are expected in the range of $0.18 to $0.19. For the full fiscal year, salesforce.com, inc. (NYSE:CRM) forecasts revenue between $6.60 billion and $6.63 billion (23% higher on the year), and EPS of $0.70 to $0.72.
Among the pool of over 700 investors that we track at Insider Monkey, we observed a significant boost of salesforce.com, inc. (NYSE:CRM)’s popularity in the latest round of 13F filings, which is a bullish signal. We track hedge funds and other investors’ activities on a quarterly basis, because we believe that despite their weak performance in the last years, these investors are very talented at picking stocks. In the backtests, which involved the period between 1999 and 2012, we determined that hedge funds’ small-cap ideas outperformed the market by nearly one percentage point per month, while their large- and mega-cap picks returned around seven basis points lower than the S&P Total Return Index on average. Based on these results, Insider Monkey has developed a strategy that focuses on imitating a portfolio of 15 most popular small-cap stocks among hedge funds. This strategy has returned some 123% since August 2012, and beat the S&P 500 ETF (SPY) by some 65 percentage points (see more details here).
With this in mind, let’s take a look at salesforce.com, inc. (NYSE:CRM), which, as it has been mentioned earlier, witnessed a significant increase of interest from the investors in our database. As the stock appreciated by 4% during the second quarter, the number of investors bullish on Salesforce went up to 68 funds that reported holding $1.85 billion worth of stock, from 46 investors owning $903.06 million in stock a quarter earlier. However, these funds held only 4.10% of the company’s outstanding stock at the end of June, which is not a solid enough figure to indicate a definitive bullish sentiment from the smart money.
A closer look at the investors with long positions in salesforce.com, inc. (NYSE:CRM) shows, that most of the top shareholders increased their stakes considerably or initiated new positions during the second quarter. For example, Ken Griffin‘s Citadel Investment Group and Dmitry Balyasny’s Balyasny Asset Management added around 4.20 million shares and 1.20 million shares to their positions and reported ownership of 4.48 million shares and 2.16 million shares in their latest 13Fs respectively. James Dondero’s Highland Capital Management and Philippe Laffont’s Coatue Management initiated new positions that contain 1.88 million shares and 557,900 shares respectively. On the other hand, Eric W. Mandelblatt‘s Soroban Capital Partners and Robert Pitts’s Steadfast Capital Management closed their position in Salesforce during the same period, previously owning 1.06 million shares and 535,500 shares respectively.
To sum up, today’s better than expected earnings and the attraction of more followers from the hedge fund industry are definitely bullish signs for salesforce.com, inc. (NYSE:CRM). This can be also supported by a stronger outlook as well as by positive upgrades issued by analysts after the company reported its financial results.
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