As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about New Relic Inc (NYSE:NEWR).
New Relic Inc (NYSE:NEWR) has experienced an increase in hedge fund sentiment of late. New Relic Inc (NYSE:NEWR) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistic is 44. Our calculations also showed that NEWR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Glenn Welling of Engaged Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, 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. Now we’re going to go over the new hedge fund action encompassing New Relic Inc (NYSE:NEWR).
Do Hedge Funds Think NEWR Is A Good Stock To Buy Now?
At Q2’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the first quarter of 2020. By comparison, 35 hedge funds held shares or bullish call options in NEWR a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Mick Hellman’s HMI Capital has the most valuable position in New Relic Inc (NYSE:NEWR), worth close to $352.2 million, accounting for 11% of its total 13F portfolio. Coming in second is David Goel and Paul Ferri of Matrix Capital Management, with a $334.9 million position; 3.7% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions contain Ricky Sandler’s Eminence Capital, Glenn W. Welling’s Engaged Capital and Constantinos J. Christofilis’s Archon Capital Management. In terms of the portfolio weights assigned to each position HMI Capital allocated the biggest weight to New Relic Inc (NYSE:NEWR), around 11.03% of its 13F portfolio. North Run Capital is also relatively very bullish on the stock, earmarking 7.65 percent of its 13F equity portfolio to NEWR.
As industrywide interest jumped, key money managers were breaking ground themselves. Engaged Capital, managed by Glenn W. Welling, assembled the largest position in New Relic Inc (NYSE:NEWR). Engaged Capital had $78.8 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also initiated a $11.1 million position during the quarter. The following funds were also among the new NEWR investors: Renaissance Technologies, Ricky Sandler’s Eminence Capital, and Qing Li’s Sciencast Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as New Relic Inc (NYSE:NEWR) but similarly valued. We will take a look at frontdoor, inc. (NASDAQ:FTDR), Lions Gate Entertainment Corporation (NYSE:LGF-B), H&R Block, Inc. (NYSE:HRB), Adient plc (NYSE:ADNT), Balchem Corporation (NASDAQ:BCPC), JFrog Ltd. (NASDAQ:FROG), and Radian Group Inc (NYSE:RDN). This group of stocks’ market values are similar to NEWR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FTDR | 33 | 686925 | -3 |
| LGF-B | 22 | 518626 | -5 |
| HRB | 30 | 229563 | 3 |
| ADNT | 35 | 662444 | -4 |
| BCPC | 15 | 50095 | 1 |
| FROG | 12 | 251080 | -8 |
| RDN | 30 | 358639 | 0 |
| Average | 25.3 | 393910 | -2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $394 million. That figure was $1282 million in NEWR’s case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand JFrog Ltd. (NASDAQ:FROG) is the least popular one with only 12 bullish hedge fund positions. New Relic Inc (NYSE:NEWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEWR is 63.7. 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 gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on NEWR as the stock returned 30.2% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow New Relic Inc. (NYSE:NEWR)
Follow New Relic Inc. (NYSE:NEWR)
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Disclosure: None. This article was originally published at Insider Monkey.
