Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Tufin Software Technologies Ltd. (NYSE:TUFN).
Is TUFN a good stock to buy now? Tufin Software Technologies Ltd. (NYSE:TUFN) shareholders have witnessed an increase in hedge fund interest of late. Tufin Software Technologies Ltd. (NYSE:TUFN) was in 9 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TUFN isn't 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 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Michael Gelband of ExodusPoint Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 we're going to view the key hedge fund action encompassing Tufin Software Technologies Ltd. (NYSE:TUFN).
Do Hedge Funds Think TUFN Is A Good Stock To Buy Now?
At the end of September, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 80% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TUFN over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Tufin Software Technologies Ltd. (NYSE:TUFN) was held by Harvey Partners, which reported holding $1.3 million worth of stock at the end of September. It was followed by Millennium Management with a $0.6 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and Engineers Gate Manager. In terms of the portfolio weights assigned to each position Harvey Partners allocated the biggest weight to Tufin Software Technologies Ltd. (NYSE:TUFN), around 1.66% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to TUFN.
As one would reasonably expect, key hedge funds were leading the bulls' herd. Millennium Management, managed by Israel Englander, created the largest position in Tufin Software Technologies Ltd. (NYSE:TUFN). Millennium Management had $0.6 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $0.3 million investment in the stock during the quarter. The following funds were also among the new TUFN investors: Renaissance Technologies, Michael Gelband's ExodusPoint Capital, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Tufin Software Technologies Ltd. (NYSE:TUFN) but similarly valued. These stocks are Fossil Group Inc (NASDAQ:FOSL), Aspen Aerogels Inc (NYSE:ASPN), Lydall, Inc. (NYSE:LDL), CRA International, Inc. (NASDAQ:CRAI), Canaan Inc. (NASDAQ:CAN), Mercantile Bank Corp. (NASDAQ:MBWM), and Ooma Inc (NYSE:OOMA). All of these stocks' market caps match TUFN's market cap.
[table]Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF PositionFOSL,11,45755,2ASPN,5,18039,-2LDL,12,48365,0CRAI,12,31116,0CAN,5,3819,2MBWM,6,17611,-1OOMA,15,83266,-2Average,9.4,35424,-0.1[/table]
As you can see these stocks had an average of 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $4 million in TUFN's case. Ooma Inc (NYSE:OOMA) is the most popular stock in this table. On the other hand Aspen Aerogels Inc (NYSE:ASPN) is the least popular one with only 5 bullish hedge fund positions. Tufin Software Technologies Ltd. (NYSE:TUFN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TUFN is 59. 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 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 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately TUFN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TUFN investors were disappointed as the stock returned 9.1% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
