How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Airbnb, Inc. (NASDAQ:ABNB) and determine whether hedge funds had an edge regarding this stock.
Airbnb, Inc. (NASDAQ:ABNB) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 58 hedge funds’ portfolios at the end of September. Our calculations also showed that ABNB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Stryker Corporation (NYSE:SYK), Atlassian Corporation Plc (NASDAQ:TEAM), and Booking Holdings Inc. (NASDAQ:BKNG) to gather more data points.
Paul Marshall of Marshall Wace
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let’s take a look at the recent hedge fund action surrounding Airbnb, Inc. (NASDAQ:ABNB).
Do Hedge Funds Think ABNB Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2021. By comparison, 0 hedge funds held shares or bullish call options in ABNB a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Airbnb, Inc. (NASDAQ:ABNB). Citadel Investment Group has a $498.3 million call position in the stock, comprising 0.1% of its 13F portfolio. On Citadel Investment Group’s heels is Renaissance Technologies, with a $465.4 million position; 0.6% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions encompass Jim Davidson, Dave Roux and Glenn Hutchins’s Silver Lake Partners, Christopher Lyle’s SCGE Management and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Kayak Investment Partners allocated the biggest weight to Airbnb, Inc. (NASDAQ:ABNB), around 5.56% of its 13F portfolio. Emerson Point Capital is also relatively very bullish on the stock, earmarking 5.52 percent of its 13F equity portfolio to ABNB.
Because Airbnb, Inc. (NASDAQ:ABNB) has experienced a decline in interest from hedge fund managers, it’s safe to say that there were a few fund managers who sold off their full holdings in the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the largest stake of the 750 funds watched by Insider Monkey, totaling close to $39.8 million in stock. Joseph Samuels’s fund, Islet Management, also said goodbye to its stock, about $30.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Airbnb, Inc. (NASDAQ:ABNB). These stocks are Stryker Corporation (NYSE:SYK), Atlassian Corporation Plc (NASDAQ:TEAM), Booking Holdings Inc. (NASDAQ:BKNG), GlaxoSmithKline plc (NYSE:GSK), Lockheed Martin Corporation (NYSE:LMT), Infosys Limited (NYSE:INFY), and Prologis Inc (NYSE:PLD). This group of stocks’ market caps are similar to ABNB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SYK | 46 | 3364535 | -2 |
| TEAM | 60 | 6079499 | -4 |
| BKNG | 96 | 8429836 | -4 |
| GSK | 31 | 1658987 | 3 |
| LMT | 51 | 1284495 | -7 |
| INFY | 29 | 2473668 | 7 |
| PLD | 32 | 483464 | -8 |
| Average | 49.3 | 3396355 | -2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 49.3 hedge funds with bullish positions and the average amount invested in these stocks was $3396 million. That figure was $2713 million in ABNB’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Infosys Limited (NYSE:INFY) is the least popular one with only 29 bullish hedge fund positions. Airbnb, Inc. (NASDAQ:ABNB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ABNB is 52.2. 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 positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, ABNB wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ABNB were disappointed as the stock returned -8.2% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
