Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Twilio Inc. (NYSE:TWLO).
Is Twilio Inc. (NYSE:TWLO) going to take off soon? Investors who are in the know were getting less optimistic. The number of long hedge fund bets went down by 2 recently. Twilio Inc. (NYSE:TWLO) was in 96 hedge funds’ portfolios at the end of September. The all time high for this statistic is 99. Our calculations also showed that TWLO ranked 20th among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 98 hedge funds in our database with TWLO positions at the end of the second quarter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to go over the latest hedge fund action regarding Twilio Inc. (NYSE:TWLO).
Philippe Laffont of Coatue Management
Do Hedge Funds Think TWLO Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 96 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TWLO over the last 25 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, ARK Investment Management was the largest shareholder of Twilio Inc. (NYSE:TWLO), with a stake worth $1036.5 million reported as of the end of September. Trailing ARK Investment Management was SCGE Management, which amassed a stake valued at $887.9 million. Coatue Management, Matrix Capital Management, and Alkeon Capital 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 Highline Capital Management allocated the biggest weight to Twilio Inc. (NYSE:TWLO), around 10.19% of its 13F portfolio. Jeneq Management is also relatively very bullish on the stock, setting aside 9.25 percent of its 13F equity portfolio to TWLO.
Judging by the fact that Twilio Inc. (NYSE:TWLO) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few money managers who were dropping their entire stakes heading into Q4. At the top of the heap, Josh Resnick’s Jericho Capital Asset Management sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $213.9 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dumped about $122.6 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Twilio Inc. (NYSE:TWLO) but similarly valued. These stocks are Emerson Electric Co. (NYSE:EMR), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Relx PLC (NYSE:RELX), UBS Group AG (NYSE:UBS), General Dynamics Corporation (NYSE:GD), Thomson Reuters Corporation (NYSE:TRI), and Baidu, Inc. (NASDAQ:BIDU). This group of stocks’ market caps match TWLO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EMR | 41 | 671007 | -4 |
| CRWD | 74 | 6742307 | 8 |
| RELX | 7 | 66312 | 1 |
| UBS | 15 | 166803 | 0 |
| GD | 36 | 6719691 | -1 |
| TRI | 27 | 246145 | 0 |
| BIDU | 44 | 2004620 | -15 |
| Average | 34.9 | 2373841 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.9 hedge funds with bullish positions and the average amount invested in these stocks was $2374 million. That figure was $6370 million in TWLO’s case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Twilio Inc. (NYSE:TWLO) is more popular among hedge funds. Our overall hedge fund sentiment score for TWLO is 89.6. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately TWLO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TWLO were disappointed as the stock returned -10.3% since the end of the third quarter (through 11/30) 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.
