SalesForce – Hedge Funds Are Cashing Out Of salesforce.com, inc. (CRM)
Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in salesforce.com, inc. (NYSE:CRM)? The smart money sentiment can provide an answer to this question.
Is salesforce.com, inc. (NYSE:CRM) a cheap stock to buy now? The best stock pickers were becoming less hopeful. The number of long hedge fund bets were trimmed by 6 in recent months. salesforce.com, inc. (NYSE:CRM) was in 91 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 117. Our calculations also showed that CRM ranked 28th among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 97 hedge funds in our database with CRM positions at the end of the fourth quarter.
To the average investor there are tons of metrics market participants employ to appraise publicly traded companies. Two of the most under-the-radar metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outclass the S&P 500 by a solid margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Glen Kacher of Light Street Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell 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. With all of this in mind let’s take a gander at the new hedge fund action regarding salesforce.com, inc. (NYSE:CRM).
Do Hedge Funds Think CRM Is A Good Stock To Buy Now?
At Q1’s end, a total of 91 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CRM over the last 23 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes 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 $2744.3 million reported as of the end of March. Trailing Fisher Asset Management was Citadel Investment Group, which amassed a stake valued at $1075 million. Arrowstreet Capital, Matrix Capital Management, and Tiger Global Management LLC 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 ROAM Global Management allocated the biggest weight to salesforce.com, inc. (NYSE:CRM), around 28.55% of its 13F portfolio. TenCore Partners is also relatively very bullish on the stock, setting aside 13.35 percent of its 13F equity portfolio to CRM.
Due to the fact that salesforce.com, inc. (NYSE:CRM) has faced bearish sentiment from hedge fund managers, we can see that there was a specific group of money managers that slashed their positions entirely in the first quarter. It’s worth mentioning that Rajiv Jain’s GQG Partners sold off the largest investment of the 750 funds followed by Insider Monkey, comprising about $296 million in stock, and Panayotis Takis Sparaggis’s Alkeon Capital Management was right behind this move, as the fund dropped about $212.5 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 6 funds in the first quarter.
Let’s check out hedge fund activity in other stocks similar to salesforce.com, inc. (NYSE:CRM). These stocks are Merck & Co., Inc. (NYSE:MRK), Novartis AG (NYSE:NVS), AbbVie Inc (NYSE:ABBV), Broadcom Inc (NASDAQ:AVGO), Accenture Plc (NYSE:ACN), Thermo Fisher Scientific Inc. (NYSE:TMO), and Eli Lilly and Company (NYSE:LLY). All of these stocks’ market caps are closest to CRM‘s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRK,79,6494373,-3 NVS,19,1709243,-4 ABBV,72,5916781,-11 AVGO,53,3313279,-6 ACN,48,2350908,-2 TMO,79,6254066,-10 LLY,55,2522416,5 Average,57.9,4080152,-4.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.9 hedge funds with bullish positions and the average amount invested in these stocks was $4080 million. That figure was $8837 million in CRM‘s case. Merck & Co., Inc. (NYSE:MRK) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks salesforce.com, inc. (NYSE:CRM) is more popular among hedge funds. Our overall hedge fund sentiment score for CRM is 72.3. 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 returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on CRM as the stock returned 13.4% since the end of March (through 6/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.