In this article, we’ll look at trends in hedge fund sentiment towards Cloudflare, Inc. (NYSE:NETWORK) and determine if it’s a good investment right now. At Insider Monkey, we love to research what billionaires and hedge funds think of a company before we spend days researching it. Because of their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to networks of experts and receive tips from industry experts. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds do miserably at times, but their consensus decisions have historically outperformed the market after risk adjustments.
Is NET Stock a Buy or a Selling? Cloudflare, Inc. (NYSE:NETWORK) Investors should be aware of the increased craze for smart money lately. Cloudflare, Inc. (NYSE:NETWORK) was in 60 hedge fund portfolios at the end of the fourth quarter of 2020. The all-time high for this statistic is 44, which means the bullish number of hedge fund positions in this stock is currently at its all-time high. At the end of the third quarter, there were 44 hedge funds in our database with NET positions. Our calculations have also shown that NET is not one of the 30 Most Popular Stocks Among Hedge Funds (Click here for the Q4 ranking).
In the financial world, investors have a variety of tools available to value stocks. A couple of the most widely used instruments are hedge fund and insider trading indicators. We have shown that those who follow the top picks of the best fund managers have historically outperformed the broader indices by a solid amount. Insider Monkey’s monthly stock picking has returned 197% since March 2017, outperforming the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (Details can be found here). Because of this, we believe that sentiment in hedge funds is a useful indicator to watch out for.
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Do hedge funds think NET is a good stock to buy right now?
At the end of December, a total of 60 hedge funds tracked by Insider Monkey were bullish on this stock, up 36% from the previous quarter. The following graph shows the number of hedge funds with a bullish position in NET over the last 22 quarters. So let’s review which hedge funds were among the top owners of the stock and which hedge funds made big moves.
The largest stake in Cloudflare, Inc. (NYSE: NET) was held by Alkeon Capital Management, who held shares valued at $ 98 million at the end of December. Citadel Investment Group followed with a position of $ 79 million. Other upbeat investors in the company included D E Shaw, Duquesne Capital and Millennium Management. In relation to the portfolio weights assigned to each position SW Investment Management Cloudflare, Inc. (NYSE: NET) received the largest weight, approximately 19.3% of its 13F portfolio. Cota Capital is also relatively bullish on the stock, providing 8.69 percent of its 13F stock portfolio for NET.
As headline rates increased, key money managers themselves broke the ground. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, initiated the largest position in Cloudflare, Inc. (NYSE: NET). Alkeon Capital Management had invested $ 98 million in the company as of the end of the quarter. Michael Pausic’s Foxhaven Asset Management also opened a position of $ 57.4 million in the quarter. The other funds with new positions in the stock are Catherine D. Woods ARK Investment Management and Alex Sacerdotes Whale Rock Capital Management.
Let’s look at hedge fund activity in other stocks – not necessarily in the same industry as Cloudflare, Inc. (NYSE: NET), but rated similarly. We take a look at PT Telekomunikasi Indonesia (NYSE:TLK), Lennar Corporation (NYSE:LEN), Valero Energy Corporation (NYSE:VLO), KKR & Co Inc. (NYSE:KKR), ViacomCBS Inc. (NASDAQ:VIAC), Ameriprise Financial, Inc. (NYSE:AMP) and Old Dominion Freight Line (NASDAQ:ODFL). The market values of this group of stocks correspond to the market value of NET.
[table] Ticker, number of HRs with positions, total value of HR positions (x1000), change in HR position TLK, 4.173765, -4 LEN, 52.1529604, -8 VLO, 38.409945.0 KKR, 54.4136875 .4 VIAC, 44.919129.0 AMP, 34.642947.5 ODFL, 50.891260.3 average, 39.4.1243361.0 [/table]
View table here When formatting problems occur.
As you can see, these stocks had an average of 39.4 hedge funds with bullish positions and the average amount invested in these stocks was $ 1,243 million. That figure was $ 1,182 million in NET’s case. KKR & Co Inc. (NYSE:KKR) is the most popular stock in this table. PT Telekomunikasi Indonesia (NYSE:TLK) is the least popular with only 4 bullish hedge fund positions. Compared to these stocks, Cloudflare, Inc. (NYSE: NET) is more popular with hedge funds. Our overall hedge fund sentiment score for NET is 90. Stocks with a higher number of hedge fund positions relative to other stocks and relative to their historical range receive a higher sentiment score. Our calculations have shown that Top 30 most popular stocks Hedge funds returned 81.2% in 2019 and 2020, outperforming the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% through March 19, 2021, still outperforming the market by 0.8 percentage points. Unfortunately, NET wasn’t nearly as popular as those 30 stocks and hedge funds that backed NET. They were disappointed as the stock returned -5.7% since the end of the fourth quarter (through March 19) and underperformed the market. If you’re interested in investing in large-cap stocks with big upside potential, this is what you should check out Top 30 most popular stocks among hedge funds, as most of these stocks have outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider monkey.