eBay Inc (EBAY): Are Hedge Funds Right About This Stock?

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at eBay Inc (NASDAQ:EBAY) from the perspective of those elite funds.

eBay Inc (NASDAQ:EBAY) investors should be aware of a decrease in hedge fund interest in recent months. At the end of this article we will also compare EBAY to other stocks including Canon Inc. (ADR) (NYSE:CAJ), Estee Lauder Companies Inc (NYSE:EL), and Becton, Dickinson and Co. (NYSE:BDX) to get a better sense of its popularity.

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One of the main reasons why investors were bullish on eBay last year was the spin-off of PayPal, which was completed at the end of July. Billionaire activist Carl Icahn, who had been pushing for the spin-off, said in an statement in 2014:

“As I have said in the past and have continued to maintain, it is almost a “no brainer” that these companies should be separated to increase the value of these great assets and thus to meaningfully enhance value for all shareholders.”

However, even after the spin-off, eBay still represents a great investment. At the Sohn London Investent Conference last year, Per Johansson of Bodenholm Capital pitched his bullish thesis on eBay and said that the spin-off of PayPal offered investors the opportunity to invest in a “smaller eBay”. Johansson added that eBay still has a strong balance sheet and growth was going to pick up across most brands owned by the company.

On the financial side, however, eBay’s revenue and earnings have been falling for the past several quarters. For the fourth quarter of 2015, the company reported revenue of $2.30 billion, down from $4.90 billion a year earlier and slightly missing the estimates of $2.32 billion, while its EPS slipped to $0.50 from $0.90, a year earlier, and was in line with the Street’s expectations.

Now, we’re going to take a look at the key action surrounding eBay Inc (NASDAQ:EBAY).

Hedge fund activity in eBay Inc (NASDAQ:EBAY)

At Q4’s end, a total of 72 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 13% from the third quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Daniel S. Och’s OZ Management has the biggest position in eBay Inc (NASDAQ:EBAY), worth close to $238.1 million, comprising 1.3% of its total 13F portfolio. Coming in second is Generation Investment Management, led by David Blood and Al Gore, holding a $214.1 million position; the fund has 2.7% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass D. E. Shaw’s D E Shaw, David Cohen and Harold Levy’s Iridian Asset Management and Cliff Asness’s AQR Capital Management.

Due to the fact that eBay Inc (NASDAQ:EBAY) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers that decided to sell off their entire stakes heading into 2016. Intriguingly, Seth Klarman’s Baupost Group dumped the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at about $227.7 million in stock. William B. Gray’s fund, Orbis Investment Management, also sold off its stock, about $223.5 million worth. These moves are important to note, as total hedge fund interest was cut by 11 funds during the fourth quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as eBay Inc (NASDAQ:EBAY) but similarly valued. We will take a look at Canon Inc. (ADR) (NYSE:CAJ), Estee Lauder Companies Inc (NYSE:EL), Becton, Dickinson and Co. (NYSE:BDX), and T MOBILE US INC (NYSE:TMUS). This group of stocks’ market values match EBAY’s market value.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $974 million. That figure was $2.80 billion in EBAY’s case. T MOBILE US INC (NYSE:TMUS) is the most popular stock in this table. On the other hand Canon Inc. (ADR) (NYSE:CAJ) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks eBay Inc (NASDAQ:EBAY) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.