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 Coinbase Global Inc. (NASDAQ:COIN) and determine whether hedge funds skillfully traded this stock.
Is Coinbase Global Inc. (NASDAQ:COIN) going to take off soon? Money managers were in an optimistic mood. The number of bullish hedge fund positions went up by 50 lately. Coinbase Global Inc. (NASDAQ:COIN) was in 50 hedge funds’ portfolios at the end of September. Our calculations also showed that COIN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Lei Zhang of Hillhouse Capital Management
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. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing Coinbase Global Inc. (NASDAQ:COIN).
Do Hedge Funds Think COIN Is A Good Stock To Buy Now?
At third quarter’s end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50 from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in COIN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Coinbase Global Inc. (NASDAQ:COIN) was held by ARK Investment Management, which reported holding $1590.8 million worth of stock at the end of September. It was followed by Tiger Global Management LLC with a $608.9 million position. Other investors bullish on the company included Citadel Investment Group, Citadel Investment Group, and Atreides Management. In terms of the portfolio weights assigned to each position Axel Capital Management allocated the biggest weight to Coinbase Global Inc. (NASDAQ:COIN), around 10.6% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, earmarking 4.93 percent of its 13F equity portfolio to COIN.
As one would reasonably expect, key money managers were breaking ground themselves. Light Street Capital, managed by Glen Kacher, created the most valuable position in Coinbase Global Inc. (NASDAQ:COIN). Light Street Capital had $98.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $16.3 million investment in the stock during the quarter. The other funds with brand new COIN positions are Lei Zhang’s Hillhouse Capital Management, Zach Schreiber’s Point State Capital, and Kevin Cottrell and Chris LaSusa’s KCL Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Coinbase Global Inc. (NASDAQ:COIN) but similarly valued. We will take a look at Eni SpA (NYSE:E), Freeport-McMoRan Inc. (NYSE:FCX), Fortinet Inc (NASDAQ:FTNT), Agilent Technologies Inc. (NYSE:A), Enterprise Products Partners L.P. (NYSE:EPD), American International Group Inc (NYSE:AIG), and Exelon Corporation (NYSE:EXC). This group of stocks’ market values match COIN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| E | 3 | 75414 | 0 |
| FCX | 66 | 3213384 | -10 |
| FTNT | 38 | 1139238 | 6 |
| A | 46 | 3135637 | 7 |
| EPD | 25 | 233255 | -3 |
| AIG | 30 | 1904264 | -9 |
| EXC | 36 | 1108781 | 1 |
| Average | 34.9 | 1544282 | -1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.9 hedge funds with bullish positions and the average amount invested in these stocks was $1544 million. That figure was $2968 million in COIN’s case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 3 bullish hedge fund positions. Coinbase Global Inc. (NASDAQ:COIN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COIN is 69.7. 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, COIN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on COIN were disappointed as the stock returned -16.4% 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.
