Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Q2 Holdings Inc (NYSE:QTWO) to find out whether there were any major changes in hedge funds’ views.
Is Q2 Holdings Inc (NYSE:QTWO) going to take off soon? The smart money was reducing their bets on the stock. The number of long hedge fund positions were trimmed by 7 in recent months. Q2 Holdings Inc (NYSE:QTWO) was in 19 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 27. Our calculations also showed that QTWO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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Now let’s review the key hedge fund action surrounding Q2 Holdings Inc (NYSE:QTWO).
Do Hedge Funds Think QTWO Is A Good Stock To Buy Now?
At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards QTWO over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Adams Street Partners held the most valuable stake in Q2 Holdings Inc (NYSE:QTWO), which was worth $79.8 million at the end of the second quarter. On the second spot was Tremblant Capital which amassed $70.6 million worth of shares. Cota Capital, Renaissance Technologies, and Motley Fool Asset Management 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 Adams Street Partners allocated the biggest weight to Q2 Holdings Inc (NYSE:QTWO), around 16.57% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, designating 5.16 percent of its 13F equity portfolio to QTWO.
Due to the fact that Q2 Holdings Inc (NYSE:QTWO) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedgies who were dropping their positions entirely in the second quarter. Intriguingly, D. E. Shaw’s D E Shaw sold off the biggest investment of the 750 funds monitored by Insider Monkey, valued at close to $13.9 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $12.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds in the second quarter.
Let’s check out hedge fund activity in other stocks similar to Q2 Holdings Inc (NYSE:QTWO). We will take a look at Alteryx, Inc. (NYSE:AYX), Integra Lifesciences Holdings Corp (NASDAQ:IART), Nevro Corp (NYSE:NVRO), Evercore Inc. (NYSE:EVR), The Chemours Company (NYSE:CC), Elbit Systems Ltd. (NASDAQ:ESLT), and Adaptive Biotechnologies Corporation (NASDAQ:ADPT). This group of stocks’ market valuations are closest to QTWO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AYX | 33 | 782027 | -2 |
| IART | 19 | 94167 | 6 |
| NVRO | 26 | 716353 | -3 |
| EVR | 31 | 342871 | 0 |
| CC | 24 | 562111 | -3 |
| ESLT | 4 | 48909 | 1 |
| ADPT | 27 | 2217269 | -2 |
| Average | 23.4 | 680530 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $681 million. That figure was $208 million in QTWO’s case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 4 bullish hedge fund positions. Q2 Holdings Inc (NYSE:QTWO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for QTWO is 45. 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% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately QTWO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); QTWO investors were disappointed as the stock returned -22.1% since the end of June (through 10/22) 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.
Follow Q2 Holdings Inc. (NYSE:QTWO)
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Disclosure: None. This article was originally published at Insider Monkey.
