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 ChargePoint Holdings, Inc. (NYSE:CHPT).
Is ChargePoint Holdings, Inc. (NYSE:CHPT) an exceptional stock to buy now? The best stock pickers were turning bullish. The number of long hedge fund positions moved up by 24 recently. ChargePoint Holdings, Inc. (NYSE:CHPT) was in 24 hedge funds' portfolios at the end of March. Our calculations also showed that CHPT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Bart Baum of Ionic Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Now let's take a gander at the new hedge fund action regarding ChargePoint Holdings, Inc. (NYSE:CHPT).
Do Hedge Funds Think CHPT Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24 from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CHPT over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, D. E. Shaw's D E Shaw has the largest position in ChargePoint Holdings, Inc. (NYSE:CHPT), worth close to $53.4 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Electron Capital Partners, managed by Jos Shaver, which holds a $49.8 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Doug Silverman and Alexander Klabin's Senator Investment Group, Bart Baum's Ionic Capital Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Ursa Fund Management allocated the biggest weight to ChargePoint Holdings, Inc. (NYSE:CHPT), around 3.46% of its 13F portfolio. Electron Capital Partners is also relatively very bullish on the stock, dishing out 3.45 percent of its 13F equity portfolio to CHPT.
As one would reasonably expect, key money managers were leading the bulls' herd. D E Shaw, managed by D. E. Shaw, created the most outsized position in ChargePoint Holdings, Inc. (NYSE:CHPT). D E Shaw had $53.4 million invested in the company at the end of the quarter. Jos Shaver's Electron Capital Partners also initiated a $49.8 million position during the quarter. The other funds with new positions in the stock are Doug Silverman and Alexander Klabin's Senator Investment Group, Bart Baum's Ionic Capital Management, and Ken Griffin's Citadel Investment Group.
Let's now take a look at hedge fund activity in other stocks similar to ChargePoint Holdings, Inc. (NYSE:CHPT). These stocks are FLIR Systems, Inc. (NASDAQ:FLIR), Tempur Sealy International Inc. (NYSE:TPX), Chemed Corporation (NYSE:CHE), Skillz Inc. (NYSE:SKLZ), Tetra Tech, Inc. (NASDAQ:TTEK), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), and Donaldson Company, Inc. (NYSE:DCI). All of these stocks' market caps match CHPT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FLIR,33,959692,5 TPX,37,1127729,-6 CHE,24,360419,-7 SKLZ,26,672931,-7 TTEK,23,95089,-6 LECO,19,283252,-1 DCI,28,279375,2 Average,27.1,539784,-2.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $540 million. That figure was $208 million in CHPT's case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand Lincoln Electric Holdings, Inc. (NASDAQ:LECO) is the least popular one with only 19 bullish hedge fund positions. ChargePoint Holdings, Inc. (NYSE:CHPT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHPT is 32.2. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately CHPT wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CHPT investors were disappointed as the stock returned -14% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.