We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Snowflake Inc (NYSE:SNOW).
Is Snowflake Inc (NYSE:SNOW) ready to rally soon? The best stock pickers were taking a bearish view. The number of long hedge fund bets were cut by 1 lately. Snowflake Inc (NYSE:SNOW) was in 70 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 71. Our calculations also showed that SNOW isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
To the average investor there are plenty of tools shareholders employ to appraise publicly traded companies. Two of the best tools are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outperform the broader indices by a very impressive 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.
Philippe Laffont of Coatue Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium 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 we’re going to take a peek at the fresh hedge fund action surrounding Snowflake Inc (NYSE:SNOW).
Do Hedge Funds Think SNOW Is A Good Stock To Buy Now?
At the end of June, a total of 70 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -1% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SNOW over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Altimeter Capital Management held the most valuable stake in Snowflake Inc (NYSE:SNOW), which was worth $6033.3 million at the end of the second quarter. On the second spot was Berkshire Hathaway which amassed $1481.1 million worth of shares. Coatue Management, Tiger Global Management LLC, and D1 Capital Partners 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 Altimeter Capital Management allocated the biggest weight to Snowflake Inc (NYSE:SNOW), around 45.39% of its 13F portfolio. JS Capital is also relatively very bullish on the stock, designating 17.95 percent of its 13F equity portfolio to SNOW.
Due to the fact that Snowflake Inc (NYSE:SNOW) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of money managers that elected to cut their full holdings in the second quarter. Interestingly, Lone Pine Capital said goodbye to the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth about $290.6 million in stock. Brandon Haley’s fund, Holocene Advisors, also said goodbye to its stock, about $80.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the second quarter.
Let’s check out hedge fund activity in other stocks similar to Snowflake Inc (NYSE:SNOW). These stocks are Marsh & McLennan Companies, Inc. (NYSE:MMC), Chubb Limited (NYSE:CB), Baidu, Inc. (NASDAQ:BIDU), Westpac Banking Corporation (NYSE:WBK), Fiserv, Inc. (NASDAQ:FISV), Becton, Dickinson and Company (NYSE:BDX), and Illinois Tool Works Inc. (NYSE:ITW). All of these stocks’ market caps resemble SNOW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MMC | 41 | 2537494 | 4 |
| CB | 42 | 1737776 | 1 |
| BIDU | 59 | 3474215 | -30 |
| WBK | 4 | 38055 | 1 |
| FISV | 72 | 2655395 | -3 |
| BDX | 52 | 3335441 | -13 |
| ITW | 45 | 657608 | 12 |
| Average | 45 | 2062283 | -4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45 hedge funds with bullish positions and the average amount invested in these stocks was $2062 million. That figure was $12508 million in SNOW’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. Snowflake Inc (NYSE:SNOW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNOW is 82.1. 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on SNOW as the stock returned 46.3% since the end of Q2 (through 10/29) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Snowflake Inc. (NYSE:SNOW)
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Disclosure: None. This article was originally published at Insider Monkey.
