Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards MongoDB, Inc. (NASDAQ:MDB).
Is MongoDB, Inc. (NASDAQ:MDB) a bargain? The smart money was taking an optimistic view. The number of long hedge fund bets inched up by 7 lately. MongoDB, Inc. (NASDAQ:MDB) was in 37 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MDB isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Alex Sacerdote of Whale Rock 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 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to take a glance at the latest hedge fund action regarding MongoDB, Inc. (NASDAQ:MDB).
Hedge fund activity in MongoDB, Inc. (NASDAQ:MDB)
At Q2’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in MDB a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Tiger Global Management LLC was the largest shareholder of MongoDB, Inc. (NASDAQ:MDB), with a stake worth $432.6 million reported as of the end of June. Trailing Tiger Global Management LLC was Whale Rock Capital Management, which amassed a stake valued at $267.3 million. SQN Investors, Altimeter Capital 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 SQN Investors allocated the biggest weight to MongoDB, Inc. (NASDAQ:MDB), around 10.42% of its 13F portfolio. Whetstone Capital Advisors is also relatively very bullish on the stock, designating 8.01 percent of its 13F equity portfolio to MDB.
As industrywide interest jumped, specific money managers have jumped into MongoDB, Inc. (NASDAQ:MDB) headfirst. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the most valuable position in MongoDB, Inc. (NASDAQ:MDB). Polar Capital had $17.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $14.4 million investment in the stock during the quarter. The other funds with brand new MDB positions are Principal Global Investors’s Columbus Circle Investors, Noam Gottesman’s GLG Partners, and Dipak Patel’s Alight Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as MongoDB, Inc. (NASDAQ:MDB) but similarly valued. We will take a look at Tradeweb Markets Inc. (NASDAQ:TW), Mid America Apartment Communities Inc (NYSE:MAA), Liberty Global plc (NASDAQ:LBTYA), International Flavors & Fragrances Inc (NYSE:IFF), Duke Realty Corporation (NYSE:DRE), Steris Plc (NYSE:STE), and EXACT Sciences Corporation (NASDAQ:EXAS). This group of stocks’ market valuations are similar to MDB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TW | 33 | 346714 | 3 |
| MAA | 30 | 503965 | 4 |
| LBTYA | 29 | 1048280 | -1 |
| IFF | 31 | 234080 | 3 |
| DRE | 19 | 102859 | 3 |
| STE | 40 | 545240 | 5 |
| EXAS | 43 | 993223 | 9 |
| Average | 32.1 | 539194 | 3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $1248 million in MDB’s case. EXACT Sciences Corporation (NASDAQ:EXAS) is the most popular stock in this table. On the other hand Duke Realty Corporation (NYSE:DRE) is the least popular one with only 19 bullish hedge fund positions. MongoDB, Inc. (NASDAQ:MDB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MDB is 77.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 23% in 2020 through October 30th and beat the market again by 20.1 percentage points. Unfortunately MDB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MDB were disappointed as the stock returned 0.9% since the end of June (through 10/30) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
