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 salesforce.com, inc. (NYSE:CRM).
salesforce.com, inc. (NYSE:CRM) was in 106 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 117. CRM investors should be aware of a slight decrease in support from the world’s most elite money managers of late. There were 107 hedge funds in our database with CRM positions at the end of the second quarter. Our calculations also showed that CRM ranks 16th among the 30 most popular stocks among hedge funds (click for Q3 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.
In today’s marketplace there are tons of gauges stock traders have at their disposal to evaluate their stock investments. A couple of the most underrated gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outpace the S&P 500 by a superb margin (see the details here).
Brad Gerstner of Altimeter Capital
At Insider Monkey 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. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. 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. Keeping this in mind let’s go over the recent hedge fund action surrounding salesforce.com, inc. (NYSE:CRM).
How have hedgies been trading salesforce.com, inc. (NYSE:CRM)?
At third quarter’s end, a total of 106 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -1% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CRM over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of salesforce.com, inc. (NYSE:CRM), with a stake worth $2988.8 million reported as of the end of September. Trailing Fisher Asset Management was Citadel Investment Group, which amassed a stake valued at $1634.4 million. Altimeter Capital Management, GQG Partners, and Matrix Capital Management 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 TenCore Partners allocated the biggest weight to salesforce.com, inc. (NYSE:CRM), around 18.18% of its 13F portfolio. Greenlea Lane Capital is also relatively very bullish on the stock, dishing out 17.7 percent of its 13F equity portfolio to CRM.
Since salesforce.com, inc. (NYSE:CRM) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies who sold off their entire stakes by the end of the third quarter. Intriguingly, Lone Pine Capital dumped the biggest investment of all the hedgies followed by Insider Monkey, totaling close to $570.5 million in stock. Gabriel Plotkin’s fund, Melvin Capital Management, also said goodbye to its stock, about $420.3 million worth. These transactions are important to note, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to salesforce.com, inc. (NYSE:CRM). We will take a look at The Walt Disney Company (NYSE:DIS), Netflix, Inc. (NASDAQ:NFLX), Intel Corporation (NASDAQ:INTC), The Coca-Cola Company (NYSE:KO), Comcast Corporation (NASDAQ:CMCSA), Merck & Co., Inc. (NYSE:MRK), and Bank of America Corporation (NYSE:BAC). This group of stocks’ market valuations resemble CRM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DIS | 112 | 8983570 | 7 |
| NFLX | 104 | 12878421 | -9 |
| INTC | 66 | 4342499 | -12 |
| KO | 60 | 22014756 | 1 |
| CMCSA | 82 | 8148816 | 2 |
| MRK | 80 | 6363637 | 4 |
| BAC | 88 | 26637282 | -3 |
| Average | 84.6 | 12766997 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 84.6 hedge funds with bullish positions and the average amount invested in these stocks was $12767 million. That figure was $11088 million in CRM’s case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand The Coca-Cola Company (NYSE:KO) is the least popular one with only 60 bullish hedge fund positions. salesforce.com, inc. (NYSE:CRM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CRM is 86.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and beat the market again by 15.4 percentage points. Unfortunately CRM wasn’t nearly as successful as these 20 stocks and hedge funds that were betting on CRM were disappointed as the stock returned 2.5% since the end of September (through 11/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of the top 20 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.
