Did The Smart Money Get Equinix Inc (EQIX) Right?

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 Equinix Inc (NASDAQ:EQIX) and determine whether hedge funds had an edge regarding this stock.

Equinix Inc (NASDAQ:EQIX) investors should be aware of a decrease in hedge fund sentiment in recent months. Equinix Inc (NASDAQ:EQIX) was in 31 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 55. Our calculations also showed that EQIX 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 new hedge fund action encompassing Equinix Inc (NASDAQ:EQIX).

Robert Atchinson of Adage Capital Management

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

Heading into the fourth quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EQIX over the last 25 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

More specifically, Impax Asset Management was the largest shareholder of Equinix Inc (NASDAQ:EQIX), with a stake worth $503.3 million reported as of the end of September. Trailing Impax Asset Management was Alkeon Capital Management, which amassed a stake valued at $377.9 million. Adage Capital Management, Citadel Investment Group, and D E Shaw 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 Tensile Capital allocated the biggest weight to Equinix Inc (NASDAQ:EQIX), around 5.89% of its 13F portfolio. 1623 Capital is also relatively very bullish on the stock, designating 3.86 percent of its 13F equity portfolio to EQIX.

Due to the fact that Equinix Inc (NASDAQ:EQIX) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers who sold off their positions entirely heading into Q4. At the top of the heap, Robert Joseph Caruso’s Select Equity Group cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $74.9 million in stock, and Chris Rokos’s Rokos Capital Management was right behind this move, as the fund dropped about $30.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Equinix Inc (NASDAQ:EQIX). We will take a look at Becton, Dickinson and Company (NYSE:BDX), Edwards Lifesciences Corporation (NYSE:EW), Vale SA (NYSE:VALE), DoorDash, Inc. (NYSE:DASH), CME Group Inc (NASDAQ:CME), Cigna Corporation (NYSE:CI), and Westpac Banking Corporation (NYSE:WBK). All of these stocks’ market caps resemble EQIX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.6 hedge funds with bullish positions and the average amount invested in these stocks was $2981 million. That figure was $1195 million in EQIX’s case. CME Group Inc (NASDAQ:CME) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 6 bullish hedge fund positions. Equinix Inc (NASDAQ:EQIX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EQIX is 41.5. 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 negative signal and 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 surpassed the market again by 3.6 percentage points. Unfortunately, EQIX wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); EQIX investors were disappointed as the stock returned -7.9% 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.