Should You Avoid Tufin Software Technologies Ltd. (TUFN)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Tufin Software Technologies Ltd. (NYSE:TUFN).

Tufin Software Technologies Ltd. (NYSE:TUFN) has seen a decrease in hedge fund sentiment lately. Our calculations also showed that TUFN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are many indicators stock market investors put to use to grade publicly traded companies. Some of the most under-the-radar indicators are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best money managers can beat the market by a solid amount (see the details here).

Sander Gerber of Hudson Bay Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to review the new hedge fund action surrounding Tufin Software Technologies Ltd. (NYSE:TUFN).

How are hedge funds trading Tufin Software Technologies Ltd. (NYSE:TUFN)?

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in TUFN a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Antara Capital held the most valuable stake in Tufin Software Technologies Ltd. (NYSE:TUFN), which was worth $1.6 million at the end of the third quarter. On the second spot was Harvey Partners which amassed $1 million worth of shares. D E Shaw, Millennium Management, and Citadel Investment Group 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 Harvey Partners allocated the biggest weight to Tufin Software Technologies Ltd. (NYSE:TUFN), around 0.91% of its 13F portfolio. Antara Capital is also relatively very bullish on the stock, dishing out 0.26 percent of its 13F equity portfolio to TUFN.

Judging by the fact that Tufin Software Technologies Ltd. (NYSE:TUFN) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers who sold off their positions entirely by the end of the first quarter. At the top of the heap, Anand Parekh’s Alyeska Investment Group dropped the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $5.6 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its stock, about $2.6 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Tufin Software Technologies Ltd. (NYSE:TUFN) but similarly valued. These stocks are Talos Energy, Inc. (NYSE:TALO), ShotSpotter, Inc. (NASDAQ:SSTI), Graf Industrial Corp. (NYSE:GRAF), and Heritage Insurance Holdings Inc (NYSE:HRTG). This group of stocks’ market valuations resemble TUFN’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $3 million in TUFN’s case. Graf Industrial Corp. (NYSE:GRAF) is the most popular stock in this table. On the other hand ShotSpotter, Inc. (NASDAQ:SSTI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Tufin Software Technologies Ltd. (NYSE:TUFN) is even less popular than SSTI. Hedge funds dodged a bullet by taking a bearish stance towards TUFN. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately TUFN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); TUFN investors were disappointed as the stock returned 17.4% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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