Hedge Funds Are Absolutely Crazy About Twitter (TWTR)

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 Twitter Inc (NYSE:TWTR).

Is Twitter Inc (NYSE:TWTR) going to take off soon? The best stock pickers were becoming hopeful. The number of long hedge fund bets went up by 29 recently. Twitter Inc (NYSE:TWTR) was in 107 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 78. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TWTR ranked 17th among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Cathie Wood of ARK Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell 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 go over the latest hedge fund action encompassing Twitter Inc (NYSE:TWTR).

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

At first quarter’s end, a total of 107 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 37% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TWTR over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, ARK Investment Management held the most valuable stake in Twitter Inc (NYSE:TWTR), which was worth $495.9 million at the end of the fourth quarter. On the second spot was Elliott Investment Management which amassed $445.4 million worth of shares. SRS Investment Management, Citadel Investment Group, and Atreides Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ivy Lane Capital allocated the biggest weight to Twitter Inc (NYSE:TWTR), around 17.25% of its 13F portfolio. Stone House Capital is also relatively very bullish on the stock, earmarking 12.1 percent of its 13F equity portfolio to TWTR.

There weren’t any hedge funds initiating brand new positions in the stock during the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Twitter Inc (NYSE:TWTR). We will take a look at Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Canadian Pacific Railway Limited (NYSE:CP), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), The Kraft Heinz Company (NASDAQ:KHC), Relx PLC (NYSE:RELX), Dollar General Corp. (NYSE:DG), and Keurig Dr Pepper Inc. (NASDAQ:KDP). This group of stocks’ market valuations are closest to TWTR’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $3429 million. That figure was $4535 million in TWTR’s case. Dollar General Corp. (NYSE:DG) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Twitter Inc (NYSE:TWTR) is more popular among hedge funds. Our overall hedge fund sentiment score for TWTR is 92. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Unfortunately TWTR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TWTR were disappointed as the stock returned -4.9% since the end of the first quarter (through 6/11) 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 most of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.