Hedge Funds Are Dumping Shift4 Payments, Inc. (FOUR)

In this article we will analyze whether Shift4 Payments, Inc. (NYSE:FOUR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Shift4 Payments, Inc. (NYSE:FOUR) has seen a decrease in activity from the world’s largest hedge funds in recent months. Shift4 Payments, Inc. (NYSE:FOUR) was in 31 hedge funds’ portfolios at the end of June. The all time high for this statistic is 38. Our calculations also showed that FOUR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the 21st century investor’s toolkit there are a multitude of signals investors use to appraise publicly traded companies. A couple of the most useful signals are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outperform the market by a significant amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Chuck Royce of Royce & Associates

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 look at the key hedge fund action surrounding Shift4 Payments, Inc. (NYSE:FOUR).

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

At Q2’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FOUR over the last 24 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, John Smith Clark’s Southpoint Capital Advisors has the largest position in Shift4 Payments, Inc. (NYSE:FOUR), worth close to $159.3 million, amounting to 2.8% of its total 13F portfolio. Sitting at the No. 2 spot is Doug Silverman and Alexander Klabin of Senator Investment Group, with a $93.7 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Ken Griffin’s Citadel Investment Group, James Parsons’s Junto Capital Management and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Nishkama Capital allocated the biggest weight to Shift4 Payments, Inc. (NYSE:FOUR), around 6% of its 13F portfolio. Hickory Lane Capital Management is also relatively very bullish on the stock, dishing out 4.45 percent of its 13F equity portfolio to FOUR.

Due to the fact that Shift4 Payments, Inc. (NYSE:FOUR) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of money managers who were dropping their full holdings by the end of the second quarter. Interestingly, Josh Resnick’s Jericho Capital Asset Management dumped the largest investment of all the hedgies followed by Insider Monkey, worth close to $50.1 million in stock. Frank Fu’s fund, CaaS Capital, also cut its stock, about $27.2 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 2 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Shift4 Payments, Inc. (NYSE:FOUR) but similarly valued. We will take a look at Kingsoft Cloud Holdings Limited (NASDAQ:KC), Chemed Corporation (NYSE:CHE), Ternium S.A. (NYSE:TX), Hill-Rom Holdings, Inc. (NYSE:HRC), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), SiteOne Landscape Supply, Inc. (NYSE:SITE), and Starwood Property Trust, Inc. (NYSE:STWD). This group of stocks’ market caps are closest to FOUR’s market cap.

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As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $236 million. That figure was $615 million in FOUR’s case. Chemed Corporation (NYSE:CHE) is the most popular stock in this table. On the other hand Starwood Property Trust, Inc. (NYSE:STWD) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Shift4 Payments, Inc. (NYSE:FOUR) is more popular among hedge funds. Our overall hedge fund sentiment score for FOUR is 77.5. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately FOUR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FOUR were disappointed as the stock returned -19.3% since the end of the second quarter (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 since 2019.

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