Amazon.com (AMZN) vs. Tesla and Other Large-Cap Stocks: Hedge Funds’ Favorite Stock?

In this article we will analyze whether Amazon.com, Inc. (NASDAQ:AMZN) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is Amazon.com, Inc. (NASDAQ:AMZN) a buy here? The smart money was in a bullish mood. The number of bullish hedge fund bets improved by 28 recently. Amazon.com, Inc. (NASDAQ:AMZN) was in 271 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 273. Our calculations also showed that AMZN is #1 among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 243 hedge funds in our database with AMZN holdings at the end of March.

If you’d ask most investors, hedge funds are viewed as worthless, old investment tools of the past. While there are greater than 8000 funds trading at the moment, Our researchers choose to focus on the leaders of this club, around 850 funds. It is estimated that this group of investors watch over bulk of the smart money’s total capital, and by tracking their unrivaled picks, Insider Monkey has unearthed several investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .

Masayoshi Son of SB Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Keeping this in mind let’s take a peek at the fresh hedge fund action surrounding Amazon.com, Inc. (NASDAQ:AMZN).

Do Hedge Funds Think AMZN Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 271 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AMZN over the last 24 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

The largest stake in Amazon.com, Inc. (NASDAQ:AMZN) was held by Citadel Investment Group, which reported holding $13128.3 million worth of stock at the end of June. It was followed by Fisher Asset Management with a $6450.6 million position. Other investors bullish on the company included SB Management, Eagle Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position SB Management allocated the biggest weight to Amazon.com, Inc. (NASDAQ:AMZN), around 66.47% of its 13F portfolio. Skye Global Management is also relatively very bullish on the stock, earmarking 25.43 percent of its 13F equity portfolio to AMZN.

Now, some big names have jumped into Amazon.com, Inc. (NASDAQ:AMZN) headfirst. OZ Management, managed by Daniel S. Och, initiated the largest call position in Amazon.com, Inc. (NASDAQ:AMZN). OZ Management had $825.6 million invested in the company at the end of the quarter. Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners also initiated a $688 million position during the quarter. The following funds were also among the new AMZN investors: Panayotis Takis Sparaggis’s Alkeon Capital Management, Seth Wunder’s Black-and-White Capital, and Gabriel Plotkin’s Melvin Capital Management.

Let’s check out hedge fund activity in other stocks similar to Amazon.com, Inc. (NASDAQ:AMZN). We will take a look at Alphabet Inc (NASDAQ:GOOGL), Facebook Inc (NASDAQ:FB), Tesla Inc. (NASDAQ:TSLA), Alibaba Group Holding Limited (NYSE:BABA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Berkshire Hathaway Inc. (NYSE:BRK-B), and JPMorgan Chase & Co. (NYSE:JPM). This group of stocks’ market valuations are closest to AMZN’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 135.7 hedge funds with bullish positions and the average amount invested in these stocks was $19040 million. That figure was $60492 million in AMZN’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand Tesla Inc. (NASDAQ:TSLA) is the least popular one with only 60 bullish hedge fund positions. Compared to these stocks Amazon.com, Inc. (NASDAQ:AMZN) is more popular among hedge funds. Our overall hedge fund sentiment score for AMZN is 99.8. 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 gained 24.1% in 2021 through September 20th and still beat the market by 6.9 percentage points. Unfortunately AMZN wasn’t nearly as successful as these 5 stocks and hedge funds that were betting on AMZN were disappointed as the stock returned -2.5% since the end of the second quarter (through 9/20) 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 since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.