At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Cyberark Software Ltd (NASDAQ:CYBR).
Cyberark Software Ltd (NASDAQ:CYBR) shareholders have witnessed a decrease in enthusiasm from smart money recently. Our calculations also showed that CYBR isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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. 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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 easiest remote jobs that pay well to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the fresh hedge fund action regarding Cyberark Software Ltd (NASDAQ:CYBR).
What does smart money think about Cyberark Software Ltd (NASDAQ:CYBR)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in CYBR a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, RGM Capital held the most valuable stake in Cyberark Software Ltd (NASDAQ:CYBR), which was worth $69.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $23.3 million worth of shares. Melqart Asset Management, Citadel Investment Group, and Two Sigma Advisors 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 RGM Capital allocated the biggest weight to Cyberark Software Ltd (NASDAQ:CYBR), around 5.47% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, designating 0.95 percent of its 13F equity portfolio to CYBR.
Judging by the fact that Cyberark Software Ltd (NASDAQ:CYBR) has witnessed declining sentiment from the smart money, it's easy to see that there was a specific group of hedge funds that decided to sell off their positions entirely in the first quarter. Intriguingly, Thomas Bailard's Bailard Inc dropped the largest stake of all the hedgies followed by Insider Monkey, worth close to $4 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund dropped about $1.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 6 funds in the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Cyberark Software Ltd (NASDAQ:CYBR) but similarly valued. These stocks are New Jersey Resources Corp (NYSE:NJR), Gerdau SA (NYSE:GGB), National Fuel Gas Company (NYSE:NFG), and Safehold Inc. (NYSE:SAFE). All of these stocks' market caps resemble CYBR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NJR,14,36464,-6 GGB,12,88520,5 NFG,18,104176,-8 SAFE,5,7608,-2 Average,12.25,59192,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $134 million in CYBR's case. National Fuel Gas Company (NYSE:NFG) is the most popular stock in this table. On the other hand Safehold Inc. (NYSE:SAFE) is the least popular one with only 5 bullish hedge fund positions. Cyberark Software Ltd (NASDAQ:CYBR) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately CYBR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CYBR were disappointed as the stock returned 13.7% during the same time period 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.
Disclosure: None. This article was originally published at Insider Monkey.