Hedge Funds Are Dumping Equinix, Inc. (REIT) (EQIX)

In this article we are going to use hedge fund sentiment as a tool and determine whether Equinix, Inc. (REIT) (NASDAQ:EQIX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Equinix, Inc. (REIT) (NASDAQ:EQIX) was in 33 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 55. EQIX has experienced a decrease in hedge fund interest of late. There were 41 hedge funds in our database with EQIX holdings at the end of March. Our calculations also showed that EQIX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 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.

Phillip Gross of Adage Capital

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. With all of this in mind we’re going to take a peek at the fresh hedge fund action encompassing Equinix, Inc. (REIT) (NASDAQ:EQIX).

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

At the end of the second quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EQIX over the last 24 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Ian Simm’s Impax Asset Management has the largest position in Equinix, Inc. (REIT) (NASDAQ:EQIX), worth close to $482.9 million, comprising 2.1% of its total 13F portfolio. Sitting at the No. 2 spot is Alkeon Capital Management, managed by Panayotis Takis Sparaggis, which holds a $384.7 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of Phill Gross and Robert Atchinson’s Adage Capital Management, and Robert Joseph Caruso’s Select Equity Group. In terms of the portfolio weights assigned to each position Tensile Capital allocated the biggest weight to Equinix, Inc. (REIT) (NASDAQ:EQIX), around 5.82% of its 13F portfolio. 1623 Capital is also relatively very bullish on the stock, setting aside 3.85 percent of its 13F equity portfolio to EQIX.

Because Equinix, Inc. (REIT) (NASDAQ:EQIX) has witnessed falling interest from hedge fund managers, it’s safe to say that there were a few fund managers that elected to cut their entire stakes last quarter. At the top of the heap, Stuart J. Zimmer’s Zimmer Partners dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, valued at about $101.4 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund cut about $80.7 million worth. These transactions are interesting, as total hedge fund interest was cut by 8 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Equinix, Inc. (REIT) (NASDAQ:EQIX). We will take a look at Snowflake Inc (NYSE:SNOW), Marsh & McLennan Companies, Inc. (NYSE:MMC), Chubb Limited (NYSE:CB), Baidu, Inc. (NASDAQ:BIDU), Westpac Banking Corporation (NYSE:WBK), Fiserv, Inc. (NASDAQ:FISV), and Becton, Dickinson and Company (NYSE:BDX). This group of stocks’ market values are similar to EQIX’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.6 hedge funds with bullish positions and the average amount invested in these stocks was $3755 million. That figure was $1267 million in EQIX’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. Equinix, Inc. (REIT) (NASDAQ:EQIX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EQIX is 36.3. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately EQIX wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); EQIX investors were disappointed as the stock returned -2.3% since the end of June (through 10/15) 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 in 2021.

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