Should I Buy salesforce.com, inc. (CRM)?

In this article we will check out the progression of hedge fund sentiment towards salesforce.com, inc. (NYSE:CRM) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

salesforce.com, inc. (NYSE:CRM) has experienced an increase in hedge fund interest of late. salesforce.com, inc. (NYSE:CRM) was in 108 hedge funds’ portfolios at the end of June. The all time high for this statistic is 117. Our calculations also showed that CRM ranked 15th among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Charles Akre of Akre Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a gander at the new hedge fund action encompassing salesforce.com, inc. (NYSE:CRM).

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

At the end of June, a total of 108 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 107 hedge funds with a bullish position in CRM a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in salesforce.com, inc. (NYSE:CRM). Fisher Asset Management has a $3.2783 billion position in the stock, comprising 2.1% of its 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $1.204 billion position; the fund has 1.5% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions contain Ken Griffin’s Citadel Investment Group, Charles Akre’s Akre Capital Management and David Goel and Paul Ferri’s Matrix Capital Management. In terms of the portfolio weights assigned to each position ROAM Global Management allocated the biggest weight to salesforce.com, inc. (NYSE:CRM), around 20.65% of its 13F portfolio. Greenlea Lane Capital is also relatively very bullish on the stock, designating 16.46 percent of its 13F equity portfolio to CRM.

Now, key hedge funds have been driving this bullishness. Akre Capital Management, managed by Charles Akre, established the largest position in salesforce.com, inc. (NYSE:CRM). Akre Capital Management had $684 million invested in the company at the end of the quarter. Ricky Sandler’s Eminence Capital also initiated a $246.9 million position during the quarter. The following funds were also among the new CRM investors: Edmond M. Safra’s EMS Capital, Keith Meister’s Corvex Capital, and Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital.

Let’s now review hedge fund activity in other stocks similar to salesforce.com, inc. (NYSE:CRM). These stocks are Cisco Systems, Inc. (NASDAQ:CSCO), Eli Lilly and Company (NYSE:LLY), Pfizer Inc. (NYSE:PFE), Oracle Corporation (NYSE:ORCL), Abbott Laboratories (NYSE:ABT), AT&T Inc. (NYSE:T), and Novartis AG (NYSE:NVS). This group of stocks’ market values resemble CRM’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 56.7 hedge funds with bullish positions and the average amount invested in these stocks was $3075 million. That figure was $11767 million in CRM’s case. AT&T Inc. (NYSE:T) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks salesforce.com, inc. (NYSE:CRM) is more popular among hedge funds. Our overall hedge fund sentiment score for CRM is 90.7. 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. 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 returned 24.1% in 2021 through September 20th but still managed to beat the market by 6.9 percentage points. Hedge funds were also right about betting on CRM as the stock returned 5.7% since the end of June (through 9/20) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.