You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Hedge fund interest in Equinix, Inc. (REIT) (NASDAQ:EQIX) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare EQIX to other stocks including Telefonica S.A. (NYSE:TEF), ABB Ltd (NYSE:ABB), and Capital One Financial Corp. (NYSE:COF) to get a better sense of its popularity. Our calculations also showed that EQIX isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action regarding Equinix, Inc. (REIT) (NASDAQ:EQIX).
Hedge fund activity in Equinix, Inc. (REIT) (NASDAQ:EQIX)
At Q2’s end, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the first quarter of 2019. By comparison, 37 hedge funds held shares or bullish call options in EQIX a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Among these funds, Alkeon Capital Management held the most valuable stake in Equinix, Inc. (REIT) (NASDAQ:EQIX), which was worth $255 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $196.4 million worth of shares. Moreover, Farallon Capital, Rivulet Capital, and Eminence Capital were also bullish on Equinix, Inc. (REIT) (NASDAQ:EQIX), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Equinix, Inc. (REIT) (NASDAQ:EQIX) has faced bearish sentiment from hedge fund managers, it’s easy to see that there is a sect of fund managers who were dropping their entire stakes last quarter. It’s worth mentioning that Jeffrey Talpins’s Element Capital Management sold off the largest investment of the 750 funds tracked by Insider Monkey, valued at close to $18.1 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $14.2 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Equinix, Inc. (REIT) (NASDAQ:EQIX) but similarly valued. These stocks are Telefonica S.A. (NYSE:TEF), ABB Ltd (NYSE:ABB), Capital One Financial Corp. (NYSE:COF), and The Sherwin-Williams Company (NYSE:SHW). This group of stocks’ market valuations resemble EQIX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TEF | 7 | 44428 | -3 |
| ABB | 13 | 325021 | -2 |
| COF | 42 | 2009156 | -2 |
| SHW | 40 | 1429509 | -2 |
| Average | 25.5 | 952029 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $952 million. That figure was $1710 million in EQIX’s case. Capital One Financial Corp. (NYSE:COF) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 7 bullish hedge fund positions. Equinix, Inc. (REIT) (NASDAQ:EQIX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on EQIX as the stock returned 14.9% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
