Hedge Funds Are Selling Snap Inc. (SNAP)

In this article we will analyze whether Snap Inc. (NYSE:SNAP) 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.

Snap Inc. (NYSE:SNAP) investors should be aware of a decrease in hedge fund sentiment in recent months. Snap Inc. (NYSE:SNAP) was in 64 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 73. Our calculations also showed that SNAP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

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 let’s take a peek at the fresh hedge fund action encompassing Snap Inc. (NYSE:SNAP).

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

At second quarter’s end, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. On the other hand, there were a total of 49 hedge funds with a bullish position in SNAP a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Lone Pine Capital held the most valuable stake in Snap Inc. (NYSE:SNAP), which was worth $1563.3 million at the end of the second quarter. On the second spot was D E Shaw which amassed $706 million worth of shares. Citadel Investment Group, Two Sigma Advisors, 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 Jeneq Management allocated the biggest weight to Snap Inc. (NYSE:SNAP), around 9.42% of its 13F portfolio. Dorsal Capital Management is also relatively very bullish on the stock, designating 8.2 percent of its 13F equity portfolio to SNAP.

Because Snap Inc. (NYSE:SNAP) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedge funds that decided to sell off their entire stakes by the end of the second quarter. At the top of the heap, Aaron Cowen’s Suvretta Capital Management cut the largest position of all the hedgies watched by Insider Monkey, valued at about $125.6 million in stock. Renaissance Technologies, also dropped its stock, about $64.3 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 9 funds by the end of the second quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Snap Inc. (NYSE:SNAP) but similarly valued. These stocks are Lockheed Martin Corporation (NYSE:LMT), GlaxoSmithKline plc (NYSE:GSK), S&P Global Inc. (NYSE:SPGI), Stryker Corporation (NYSE:SYK), Micron Technology, Inc. (NASDAQ:MU), Moderna, Inc. (NASDAQ:MRNA), and Uber Technologies, Inc. (NYSE:UBER). This group of stocks’ market caps are similar to SNAP’s market cap.

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As you can see these stocks had an average of 66.3 hedge funds with bullish positions and the average amount invested in these stocks was $5169 million. That figure was $5400 million in SNAP’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand GlaxoSmithKline plc (NYSE:GSK) is the least popular one with only 28 bullish hedge fund positions. Snap Inc. (NYSE:SNAP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SNAP is 39.1. 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 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. A small number of hedge funds were also right about betting on SNAP as the stock returned 17.5% since the end of the second quarter (through 9/27) and outperformed the market by an even larger margin.

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

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