Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Splunk Inc (NASDAQ:SPLK).
Splunk Inc (NASDAQ:SPLK) has experienced an increase in hedge fund interest of late. Splunk Inc (NASDAQ:SPLK) was in 47 hedge funds’ portfolios at the end of June. The all time high for this statistic is 49. Our calculations also showed that SPLK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Today there are tons of metrics market participants have at their disposal to value publicly traded companies. A couple of the less utilized metrics are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outpace the broader indices by a healthy amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Bill Miller of Miller Value Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining 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 look at the recent hedge fund action regarding Splunk Inc (NASDAQ:SPLK).
Do Hedge Funds Think SPLK Is A Good Stock To Buy Now?
At Q2’s end, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SPLK over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Splunk Inc (NASDAQ:SPLK) was held by Citadel Investment Group, which reported holding $283.1 million worth of stock at the end of June. It was followed by Iridian Asset Management with a $171.3 million position. Other investors bullish on the company included Millennium Management, Miller Value Partners, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Newbrook Capital Advisors allocated the biggest weight to Splunk Inc (NASDAQ:SPLK), around 4.98% of its 13F portfolio. XN Exponent Advisors is also relatively very bullish on the stock, dishing out 3.52 percent of its 13F equity portfolio to SPLK.
With a general bullishness amongst the heavyweights, some big names have jumped into Splunk Inc (NASDAQ:SPLK) headfirst. Miller Value Partners, managed by Bill Miller, established the most outsized position in Splunk Inc (NASDAQ:SPLK). Miller Value Partners had $129.8 million invested in the company at the end of the quarter. Gaurav Kapadia’s XN Exponent Advisors also initiated a $74.6 million position during the quarter. The other funds with new positions in the stock are Robert Boucai’s Newbrook Capital Advisors, Joseph Samuels’s Islet Management, and John Brennan’s Sirios Capital Management.
Let’s go over hedge fund activity in other stocks similar to Splunk Inc (NASDAQ:SPLK). These stocks are Canon Inc. (NYSE:CAJ), Fortive Corporation (NYSE:FTV), McCormick & Company, Incorporated (NYSE:MKC), Cerner Corporation (NASDAQ:CERN), United Microelectronics Corp (NYSE:UMC), POSCO (NYSE:PKX), and Vulcan Materials Company (NYSE:VMC). All of these stocks’ market caps are closest to SPLK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAJ | 8 | 53729 | -1 |
| FTV | 31 | 2235231 | 4 |
| MKC | 34 | 2032436 | -1 |
| CERN | 38 | 1394559 | -2 |
| UMC | 10 | 141218 | -1 |
| PKX | 12 | 161569 | 0 |
| VMC | 43 | 1374916 | -5 |
| Average | 25.1 | 1056237 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $1056 million. That figure was $1186 million in SPLK’s case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Splunk Inc (NASDAQ:SPLK) is more popular among hedge funds. Our overall hedge fund sentiment score for SPLK is 88.8. 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 29.6% in 2021 through November 5th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on SPLK as the stock returned 14.9% since the end of June (through 11/5) 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.
Follow Splunk Inc (NASDAQ:SPLK)
Follow Splunk Inc (NASDAQ:SPLK)
Suggested Articles:
- 10 Best Large-cap Stocks To Buy Now
- 10 Best Coal Stocks to Buy Now
- 15 Biggest Companies with Gay CEOs
Disclosure: None. This article was originally published at Insider Monkey.
