In this article we will list the top 5 stocks that hedge funds dumped before the market crash. For a detailed discussion as well as a more comprehensive list please see 10 Stocks Hedge Funds Dumped Before the Market Crash. Here are the top 5 stocks that hedge funds dumped during the first quarter:
5. Rivian Automotive Inc (RIVN):
Number of Hedge Funds: 29 (2022Q1)
Number of Hedge Funds: 47 (2021Q4)
Hedge funds couldn’t sell Rivian (RIVN) fast enough as the number of bullish hedge fund positions in RIVN went down by 18. Tiger Global, Candlestick Capital, and Suvretta were among the hedge funds that dumped Rivian. Here is what Baron Funds said about RIVN in its latest investor letter:
“Rivian Automotive, Inc. designs, manufactures, and sells consumer and commercial electric vehicles. Shares of Rivian continued its volatile trading following the stock’s IPO in late 2021, declining 52% in the first quarter as investors rotated out of fast-growing long-duration stocks and as industrywide supply-chain issues delayed Rivian’s production ramp. In addition, even while other automotive companies raised prices due to inflationary pressures, Rivian launched a price increase campaign that was not well communicated and, as a result, was met with dissatisfaction by existing reservation holders. While this was an unforced error, the company quickly corrected course, reversing its decision to raise prices for existing reservations, while maintaining the increase on new buyers (which has not caused a material impact to demand). We retain conviction in the shares given management’s vision, Rivian’s product positioning, the company’s relationship with Amazon.com, and the company’s strong balance sheet, which will help it overcome the current challenges while taking advantage of the long-term opportunity as the market transitions to electric vehicles.”
4. Roblox Corporation (RBLX):
Number of Hedge Funds: 40 (2022Q1)
Number of Hedge Funds: 61 (2021Q4)
Another high growth stock hedge funds dumped during the first quarter is Roblox Corporation. The number of bullish hedge fund positions declined by 21 during the first three months of 2022 as RBLX lost around half of its value. Tybourne Capital, Hitchwood Capital, and Ratan Capital were among these hedge funds. Here is how Tao Value explained why hedge funds initially flocked into Roblox:
“Roblox (RBLX) got significant more attention from both institutional & retail investors after Facebook announced to rename itself as Meta Platforms. I believe the price appreciation is largely attributed to the increased attention. On business side, Roblox rolled out a few successful music events and also partnered with Netflix on testing long-form media consumption in virtual world. Apple in its iOS 14.5 rolled out an impactful change for digital advertising landscape by requiring all apps to ask users to “opt in”.
Unfortunately, both Meta Platforms and Roblox experienced huge outflows during the first quarter as investor appetite towards metaverse stocks soured.
3. Paramount Global (PARA):
Number of Hedge Funds: 40 (2022Q1)
Number of Hedge Funds: 64 (2021Q4)
Paramount Global is a casualty of streaming wars. Stocks like Netflix and Disney didn’t experience a lot of hedge fund turnover but Paramount Global did. The number of bullish hedge fund positions went down from 64 to 40 during the first quarter. Quant hedge funds like Renaissance Technologies and Two Sigma sold out of the stock during the first quarter. Here is what we recently said about PARA:
“Paramount Global (NASDAQ:PARA) is a media and entertainment firm. Latest 13F data shows that Berkshire opened a new position in the stock in the first quarter of 2022, comprising over 68 million shares worth $2.6 billion, representing 0.71% of the portfolio. On May 3, the firm posted earnings for the first quarter of 2022, reporting earnings per share of $0.60, beating market estimates by $0.08. The revenue over the period was $7.33 billion, down close to 1% compared to the revenue over the same period last year.
On May 23, Citi analyst Jason Bazinet maintained a Buy rating on Paramount Global (NASDAQ:PARA) stock and lowered the price target to $44 from $47, noting that the stock was valued on a “sum of the parts” basis.
At the end of the first quarter of 2022, 40 hedge funds in the database of Insider Monkey held stakes worth $3.4 billion in Paramount Global (NASDAQ:PARA), compared to 64 in the previous quarter worth $1 billion.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Ariel Investments is a leading shareholder in Paramount Global (NASDAQ:PARA), with 5.6 million shares worth more than $213 million. “
2. Meta Platforms (FB):
Number of Hedge Funds: 200 (2022Q1)
Number of Hedge Funds: 224 (2021Q4)
The number of bullish hedge fund positions declined by 24 during the first quarter as Facebook shares were sold off after disappointing earnings. Not everyone is bearish though. Facebook is still the 4th most popular stock among hedge funds. Here is what Baron Durable Advantage Fund has to say about Meta Platforms, Inc. (NASDAQ:FB) in its Q1 2022 investor letter:
“Meta Platforms Inc., the parent company of Facebook, reported excellent operating results in 2021. Its revenue increased 37%, operating earnings increased 40%, and the company generated $40 billion of free cash flow. Despite these excellent results, Meta experienced extreme volatility in its stock price during the first quarter. We believe that two factors are responsible for this volatility. First, the company quantified the headwind to revenue from Apple’s recent privacy changes in the amount of approximately $10 billion for 2022. Meta is rebuilding its advertising technology, and we believe the long-term headwinds from Apple’s privacy changes will be limited because Meta will create a suitable solution. Second, Meta continues to invest heavily into its Reality Labs segment, also known as the metaverse. While we believe the metaverse presents great opportunity for Meta, we are not assigning any value to it in our valuation work. While 2022 may be challenging for Meta, the company’s competitive advantages are still intact, and the company trades at a significant discount to our estimate of its intrinsic value. Despite our concerns about a possible recession, we expect Meta to return to double-digit bottom line growth next year.”
1. Sea Limited (NYSE: SE)
Number of Hedge Funds: 77 (2022Q1)
Number of Hedge Funds: 108 (2021Q4)
Number of Hedge Funds: 117 (2021Q3)
Number of Hedge Funds: 104 (2021Q2)
Total Dollar Amount of Long Hedge Fund Positions: $5.1 billion
Percent of Hedge Funds with Long Positions: 8.4%
Popularity Ranking (2022Q1): 16
Popularity Ranking (2021Q4): 16
Popularity Ranking (2021Q3): 12
Popularity Ranking (2021Q2): 18
Noteworthy Hedge Fund Shareholders: ARK Investment Management, Chase Coleman, Kora Management
Investors didn’t have any patience for cash flow negative companies that were trading at 10-50x their revenues. Sea Limited shares experienced the biggest outflow among hedge funds. SE shares closed at $223.71 on December 31st. They are currently trading at $83, losing 30% during the second quarter.
Please also see Hedge Fund Investor Letters 2022 Q1 and 10 Stocks To Buy and Hold For Decades According to Warren Buffett.
Disclosure: No positions.
