Do Hedge Funds Love Affirm Holdings, Inc. (AFRM)?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Affirm Holdings, Inc. (NASDAQ:AFRM).

Affirm Holdings, Inc. (NASDAQ:AFRM) was in 25 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 32. AFRM has seen a decrease in hedge fund sentiment of late. There were 32 hedge funds in our database with AFRM positions at the end of the first quarter. Our calculations also showed that AFRM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to review the latest hedge fund action regarding Affirm Holdings, Inc. (NASDAQ:AFRM).

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

At second quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in AFRM a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Joshua Kushner’s Thrive Capital has the number one position in Affirm Holdings, Inc. (NASDAQ:AFRM), worth close to $265 million, corresponding to 17.4% of its total 13F portfolio. The second most bullish fund manager is Abdiel Capital Advisors, led by Colin Moran, holding a $113.7 million position; the fund has 3.3% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Louis Bacon’s Moore Global Investments, Ken Griffin’s Citadel Investment Group and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Thrive Capital allocated the biggest weight to Affirm Holdings, Inc. (NASDAQ:AFRM), around 17.42% of its 13F portfolio. Hidden Lake Asset Management is also relatively very bullish on the stock, setting aside 7.26 percent of its 13F equity portfolio to AFRM.

Judging by the fact that Affirm Holdings, Inc. (NASDAQ:AFRM) has faced falling interest from the smart money, it’s safe to say that there is a sect of funds who were dropping their full holdings in the second quarter. Intriguingly, Greg Poole’s Echo Street Capital Management cut the largest position of all the hedgies watched by Insider Monkey, worth close to $48.7 million in stock, and Andreas Halvorsen’s Viking Global was right behind this move, as the fund said goodbye to about $17.7 million worth. These transactions are important to note, as total hedge fund interest was cut by 7 funds in the second quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Affirm Holdings, Inc. (NASDAQ:AFRM) but similarly valued. We will take a look at Raymond James Financial, Inc. (NYSE:RJF), Duke Realty Corporation (NYSE:DRE), Brookfield Property Partners LP (NASDAQ:BPY), Amcor plc (NYSE:AMCR), Clarivate Plc (NYSE:CLVT), MarketAxess Holdings Inc. (NASDAQ:MKTX), and Bio-Techne Corporation (NASDAQ:TECH). All of these stocks’ market caps match AFRM’s market cap.

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As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $1100 million. That figure was $824 million in AFRM’s case. Clarivate Plc (NYSE:CLVT) is the most popular stock in this table. On the other hand Duke Realty Corporation (NYSE:DRE) is the least popular one with only 15 bullish hedge fund positions. Affirm Holdings, Inc. (NASDAQ:AFRM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AFRM is 40.7. 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. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on AFRM as the stock returned 130.5% since the end of Q2 (through 10/22) 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.