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 Pinterest, Inc. (NYSE:PINS) and determine whether hedge funds skillfully traded this stock.
Is Pinterest, Inc. (NYSE:PINS) a healthy stock for your portfolio? Hedge funds were betting on the stock. The number of long hedge fund positions moved up by 1 in recent months. Our calculations also showed that PINS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
At the moment there are dozens of indicators shareholders employ to analyze stocks. A pair of the most useful indicators are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce the S&P 500 by a significant amount (see the details here).
Clint Carlson of Carlson Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now let’s view the recent hedge fund action surrounding Pinterest, Inc. (NYSE:PINS).
How are hedge funds trading Pinterest, Inc. (NYSE:PINS)?
At Q1’s end, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in PINS over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Eminence Capital, managed by Ricky Sandler, holds the largest position in Pinterest, Inc. (NYSE:PINS). Eminence Capital has a $123.2 million position in the stock, comprising 1.3% of its 13F portfolio. Sitting at the No. 2 spot is Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, which holds a $58.5 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions include Amish Mehta’s SQN Investors, Karthik Sarma’s SRS Investment Management and Andrew Bellas’s General Equity Partners. In terms of the portfolio weights assigned to each position Nishkama Capital allocated the biggest weight to Pinterest, Inc. (NYSE:PINS), around 13.18% of its 13F portfolio. General Equity Partners is also relatively very bullish on the stock, earmarking 11.19 percent of its 13F equity portfolio to PINS.
As one would reasonably expect, some big names were leading the bulls’ herd. SRS Investment Management, managed by Karthik Sarma, initiated the biggest position in Pinterest, Inc. (NYSE:PINS). SRS Investment Management had $25.7 million invested in the company at the end of the quarter. Andrew Bellas’s General Equity Partners also initiated a $17.1 million position during the quarter. The other funds with brand new PINS positions are Clint Carlson’s Carlson Capital, Seth Wunder’s Black-and-White Capital, and Josh Donfeld and David Rogers’s Castle Hook Partners.
Let’s now review hedge fund activity in other stocks similar to Pinterest, Inc. (NYSE:PINS). We will take a look at GDS Holdings Limited (NASDAQ:GDS), CarMax Inc (NYSE:KMX), Raymond James Financial, Inc. (NYSE:RJF), and The Trade Desk, Inc. (NASDAQ:TTD). This group of stocks’ market values are closest to PINS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GDS | 41 | 1618404 | 7 |
| KMX | 37 | 1084332 | -13 |
| RJF | 31 | 441370 | 3 |
| TTD | 25 | 393525 | 1 |
| Average | 33.5 | 884408 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $884 million. That figure was $410 million in PINS’s case. GDS Holdings Limited (NASDAQ:GDS) is the most popular stock in this table. On the other hand The Trade Desk, Inc. (NASDAQ:TTD) is the least popular one with only 25 bullish hedge fund positions. Pinterest, Inc. (NYSE:PINS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on PINS as the stock returned 43.6% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
