Did Hedge Funds Get Shift4 Payments, Inc. (FOUR) Right?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Shift4 Payments, Inc. (NYSE:FOUR) and determine whether hedge funds skillfully traded this stock.

Is Shift4 Payments, Inc. (NYSE:FOUR) a buy, sell, or hold? The smart money was taking an optimistic view. The number of long hedge fund bets advanced by 1 recently. Shift4 Payments, Inc. (NYSE:FOUR) was in 32 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that FOUR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Now let’s review the key hedge fund action encompassing Shift4 Payments, Inc. (NYSE:FOUR).

Sahm Adrangi of Kerrisdale Capital

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

At third quarter’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the second quarter of 2021. By comparison, 32 hedge funds held shares or bullish call options in FOUR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Southpoint Capital Advisors was the largest shareholder of Shift4 Payments, Inc. (NYSE:FOUR), with a stake worth $124 million reported as of the end of September. Trailing Southpoint Capital Advisors was Senator Investment Group, which amassed a stake valued at $93 million. Point72 Asset Management, Millennium Management, and Kerrisdale Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Nishkama Capital allocated the biggest weight to Shift4 Payments, Inc. (NYSE:FOUR), around 6.15% of its 13F portfolio. Hickory Lane Capital Management is also relatively very bullish on the stock, setting aside 4.16 percent of its 13F equity portfolio to FOUR.

As one would reasonably expect, specific money managers have been driving this bullishness. Maplelane Capital, managed by Leon Shaulov, initiated the biggest position in Shift4 Payments, Inc. (NYSE:FOUR). Maplelane Capital had $29.5 million invested in the company at the end of the quarter. Mikal Patel’s Oribel Capital Management also made a $13.8 million investment in the stock during the quarter. The other funds with brand new FOUR positions are Leon Shaulov’s Maplelane Capital, Allon Hellmann’s Full18 Capital, and Ira Unschuld’s Brant Point Investment Management.

Let’s go over hedge fund activity in other stocks similar to Shift4 Payments, Inc. (NYSE:FOUR). These stocks are Coty Inc (NYSE:COTY), MasTec, Inc. (NYSE:MTZ), Elbit Systems Ltd. (NASDAQ:ESLT), KT Corporation (NYSE:KT), Nexstar Media Group, Inc. (NASDAQ:NXST), Texas Roadhouse Inc (NASDAQ:TXRH), and Petco Health and Wellness Company, Inc. (NASDAQ:WOOF). All of these stocks’ market caps are similar to FOUR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.7 hedge funds with bullish positions and the average amount invested in these stocks was $481 million. That figure was $628 million in FOUR’s case. Coty Inc (NYSE:COTY) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 4 bullish hedge fund positions. Shift4 Payments, Inc. (NYSE:FOUR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FOUR is 70.2. 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, FOUR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FOUR were disappointed as the stock returned -32% 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.