Hedge Funds Are Betting On Airbnb, Inc. (ABNB)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Airbnb, Inc. (NASDAQ:ABNB)? The smart money sentiment can provide an answer to this question.

Airbnb, Inc. (NASDAQ:ABNB) has experienced an increase in hedge fund sentiment in recent months. Airbnb, Inc. (NASDAQ:ABNB) was in 58 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 68. There were 52 hedge funds in our database with ABNB holdings at the end of March. Our calculations also showed that ABNB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Lei Zhang of Hillhouse Capital Management

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. Now let’s take a glance at the latest hedge fund action regarding Airbnb, Inc. (NASDAQ:ABNB).

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

At the end of the second quarter, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ABNB over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Airbnb, Inc. (NASDAQ:ABNB), which was worth $526.6 million at the end of the second quarter. On the second spot was Silver Lake Partners which amassed $391.9 million worth of shares. Hillhouse Capital Management, SCGE Management, and Citadel Investment Group 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 Jericho Capital Asset Management allocated the biggest weight to Airbnb, Inc. (NASDAQ:ABNB), around 3.7% of its 13F portfolio. Hillhouse Capital Management is also relatively very bullish on the stock, earmarking 3.33 percent of its 13F equity portfolio to ABNB.

As industrywide interest jumped, specific money managers were breaking ground themselves. Hillhouse Capital Management, managed by Lei Zhang, initiated the biggest position in Airbnb, Inc. (NASDAQ:ABNB). Hillhouse Capital Management had $323.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $191.8 million investment in the stock during the quarter. The following funds were also among the new ABNB investors: Renaissance Technologies, Stanley Druckenmiller’s Duquesne Capital, and Joseph Samuels’s Islet Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Airbnb, Inc. (NASDAQ:ABNB) but similarly valued. These stocks are British American Tobacco plc (NYSE:BTI), Infosys Limited (NYSE:INFY), Booking Holdings Inc. (NASDAQ:BKNG), PetroChina Company Limited (NYSE:PTR), BP plc (NYSE:BP), Zoetis Inc (NYSE:ZTS), and Prologis Inc (NYSE:PLD). This group of stocks’ market valuations are similar to ABNB’s market valuation.

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As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $2079 million. That figure was $2711 million in ABNB’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 8 bullish hedge fund positions. Airbnb, Inc. (NASDAQ:ABNB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ABNB is 62.8. 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 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. Hedge funds were also right about betting on ABNB as the stock returned 13.8% since the end of Q2 (through 9/27) 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.