At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Fitbit Inc (NYSE:FIT) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Fitbit Inc (NYSE:FIT) was in 30 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 35. FIT has seen an increase in hedge fund interest recently. There were 26 hedge funds in our database with FIT positions at the end of the first quarter. Our calculations also showed that FIT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
James Dinan of York Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 go over the recent hedge fund action regarding Fitbit Inc (NYSE:FIT).
What have hedge funds been doing with Fitbit Inc (NYSE:FIT)?
At Q2’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FIT over the last 20 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Fitbit Inc (NYSE:FIT) was held by Magnetar Capital, which reported holding $70.1 million worth of stock at the end of September. It was followed by Pentwater Capital Management with a $57 million position. Other investors bullish on the company included Renaissance Technologies, Alpine Associates, and Coatue Management. In terms of the portfolio weights assigned to each position Litespeed Management allocated the biggest weight to Fitbit Inc (NYSE:FIT), around 5.76% of its 13F portfolio. HighVista Strategies is also relatively very bullish on the stock, dishing out 2.41 percent of its 13F equity portfolio to FIT.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. York Capital Management, managed by James Dinan, created the biggest position in Fitbit Inc (NYSE:FIT). York Capital Management had $8.7 million invested in the company at the end of the quarter. David Alexander Witkin’s Beryl Capital Management also initiated a $7.1 million position during the quarter. The other funds with new positions in the stock are John Orrico’s Water Island Capital, Dmitry Balyasny’s Balyasny Asset Management, and Tom Sandell’s Sandell Asset Management.
Let’s now review hedge fund activity in other stocks similar to Fitbit Inc (NYSE:FIT). These stocks are Moelis & Company (NYSE:MC), Insight Enterprises, Inc. (NASDAQ:NSIT), Hecla Mining Company (NYSE:HL), Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB), Four Corners Property Trust, Inc. (NYSE:FCPT), Paramount Group Inc (NYSE:PGRE), and Silicon Motion Technology Corp. (NASDAQ:SIMO). All of these stocks’ market caps are closest to FIT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MC | 8 | 48802 | -2 |
| NSIT | 20 | 72128 | 7 |
| HL | 13 | 42245 | -2 |
| YMAB | 13 | 148275 | 2 |
| FCPT | 19 | 69779 | 5 |
| PGRE | 21 | 97593 | 2 |
| SIMO | 17 | 278039 | -1 |
| Average | 15.9 | 108123 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $351 million in FIT’s case. Paramount Group Inc (NYSE:PGRE) is the most popular stock in this table. On the other hand Moelis & Company (NYSE:MC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Fitbit Inc (NYSE:FIT) is more popular among hedge funds. Our overall hedge fund sentiment score for FIT is 84.7. 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 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Unfortunately FIT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FIT were disappointed as the stock returned -1.4% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Follow Fitbit Inc. (NYSE:FIT)
Follow Fitbit Inc. (NYSE:FIT)
Disclosure: None. This article was originally published at Insider Monkey.
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