Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let’s see whether CrowdStrike Holdings, Inc. (NASDAQ:CRWD) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is CrowdStrike Holdings, Inc. (NASDAQ:CRWD) a worthy investment right now? Money managers are buying. The number of bullish hedge fund positions rose by 19 recently. Our calculations also showed that CRWD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). CRWD was in 48 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 29 hedge funds in our database with CRWD positions at the end of the previous quarter.
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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Glen Kacher of Light Street Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the fresh hedge fund action regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD).
How have hedgies been trading CrowdStrike Holdings, Inc. (NASDAQ:CRWD)?
Heading into the first quarter of 2020, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 66% from the third quarter of 2019. On the other hand, there were a total of 0 hedge funds with a bullish position in CRWD a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Point72 Asset Management, managed by Steve Cohen, holds the largest position in CrowdStrike Holdings, Inc. (NASDAQ:CRWD). Point72 Asset Management has a $87.1 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $64.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish contain Alex Sacerdote’s Whale Rock Capital Management, Dmitry Balyasny’s Balyasny Asset Management and Anand Parekh’s Alyeska Investment Group. In terms of the portfolio weights assigned to each position Element Capital Management allocated the biggest weight to CrowdStrike Holdings, Inc. (NASDAQ:CRWD), around 7.24% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, designating 2.7 percent of its 13F equity portfolio to CRWD.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in CrowdStrike Holdings, Inc. (NASDAQ:CRWD). Balyasny Asset Management had $48 million invested in the company at the end of the quarter. Glen Kacher’s Light Street Capital also made a $45.1 million investment in the stock during the quarter. The other funds with brand new CRWD positions are Jeffrey Talpins’s Element Capital Management, David Fiszel’s Honeycomb Asset Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CrowdStrike Holdings, Inc. (NASDAQ:CRWD) but similarly valued. We will take a look at E*TRADE Financial Corporation (NASDAQ:ETFC), Reinsurance Group of America Inc (NYSE:RGA), Textron Inc. (NYSE:TXT), and FactSet Research Systems Inc. (NYSE:FDS). This group of stocks’ market values are similar to CRWD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ETFC | 48 | 946730 | 4 |
| RGA | 27 | 412374 | 1 |
| TXT | 30 | 859950 | 5 |
| FDS | 24 | 225368 | 3 |
| Average | 32.25 | 611106 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $611 million. That figure was $613 million in CRWD’s case. E*TRADE Financial Corporation (NASDAQ:ETFC) is the most popular stock in this table. On the other hand FactSet Research Systems Inc. (NYSE:FDS) is the least popular one with only 24 bullish hedge fund positions. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. Hedge funds were also right about betting on CRWD as the stock returned 38.8% in 2020 (through May 1st) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
