How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Match Group, Inc. (NASDAQ:MTCH) and determine whether hedge funds had an edge regarding this stock.
Match Group, Inc. (NASDAQ:MTCH) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. Match Group, Inc. (NASDAQ:MTCH) was in 39 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 44. Our calculations also showed that MTCH 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.
John Armitage of Egerton Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 take a glance at the new hedge fund action encompassing Match Group, Inc. (NASDAQ:MTCH).
How are hedge funds trading Match Group, Inc. (NASDAQ:MTCH)?
Heading into the third quarter of 2020, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the first quarter of 2020. On the other hand, there were a total of 31 hedge funds with a bullish position in MTCH a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Lone Pine Capital was the largest shareholder of Match Group, Inc. (NASDAQ:MTCH), with a stake worth $495 million reported as of the end of September. Trailing Lone Pine Capital was Ursa Fund Management, which amassed a stake valued at $354.7 million. Egerton Capital Limited, Tybourne Capital 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 Portsea Asset Management allocated the biggest weight to Match Group, Inc. (NASDAQ:MTCH), around 33.17% of its 13F portfolio. Ursa Fund Management is also relatively very bullish on the stock, earmarking 21.45 percent of its 13F equity portfolio to MTCH.
As industrywide interest jumped, some big names have been driving this bullishness. Tybourne Capital Management, managed by Eashwar Krishnan, initiated the largest position in Match Group, Inc. (NASDAQ:MTCH). Tybourne Capital Management had $273 million invested in the company at the end of the quarter. Scott Bessent’s Key Square Capital Management also initiated a $39 million position during the quarter. The other funds with new positions in the stock are Leon Shaulov’s Maplelane Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Louis Bacon’s Moore Global Investments.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Match Group, Inc. (NASDAQ:MTCH) but similarly valued. These stocks are Ross Stores, Inc. (NASDAQ:ROST), Dow Inc. (NYSE:DOW), KLA Corporation (NASDAQ:KLAC), ICICI Bank Limited (NYSE:IBN), IHS Markit Ltd. (NYSE:INFO), Canadian Imperial Bank of Commerce (NYSE:CM), and EOG Resources Inc (NYSE:EOG). All of these stocks’ market caps are closest to MTCH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROST | 50 | 767478 | 1 |
| DOW | 35 | 452224 | -3 |
| KLAC | 37 | 661971 | 11 |
| IBN | 20 | 231584 | -4 |
| INFO | 44 | 1532350 | 0 |
| CM | 6 | 158840 | -4 |
| EOG | 45 | 696070 | 1 |
| Average | 33.9 | 642931 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.9 hedge funds with bullish positions and the average amount invested in these stocks was $643 million. That figure was $1756 million in MTCH’s case. Ross Stores, Inc. (NASDAQ:ROST) is the most popular stock in this table. On the other hand Canadian Imperial Bank of Commerce (NYSE:CM) is the least popular one with only 6 bullish hedge fund positions. Match Group, Inc. (NASDAQ:MTCH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MTCH is 70.1. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on MTCH as the stock returned 20.9% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Match Group Holdings Ii (Old) (NASDAQ:MTCH)
Follow Match Group Holdings Ii (Old) (NASDAQ:MTCH)
Disclosure: None. This article was originally published at Insider Monkey.
