While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Snap Inc. (NYSE:SNAP).
Snap Inc. (NYSE:SNAP) investors should pay attention to an increase in support from the world’s most elite money managers lately. Snap Inc. (NYSE:SNAP) was in 73 hedge funds’ portfolios at the end of March. The all time high for this statistic is 66. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 63 hedge funds in our database with SNAP positions at the end of the fourth quarter. Our calculations also showed that SNAP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Aaron Cowen of Suvretta Capital Management
At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 go over the new hedge fund action encompassing Snap Inc. (NYSE:SNAP).
Do Hedge Funds Think SNAP Is A Good Stock To Buy Now?
At the end of March, a total of 73 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from one quarter earlier. By comparison, 48 hedge funds held shares or bullish call options in SNAP a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Lone Pine Capital was the largest shareholder of Snap Inc. (NYSE:SNAP), with a stake worth $1255.8 million reported as of the end of March. Trailing Lone Pine Capital was D E Shaw, which amassed a stake valued at $578.8 million. Citadel Investment Group, Citadel Investment Group, and Arrowstreet Capital 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 Hunt Lane Capital allocated the biggest weight to Snap Inc. (NYSE:SNAP), around 10.08% of its 13F portfolio. Jeneq Management is also relatively very bullish on the stock, setting aside 9.52 percent of its 13F equity portfolio to SNAP.
Now, some big names were breaking ground themselves. Leonard Green & Partners, managed by Leonard Green, established the most valuable call position in Snap Inc. (NYSE:SNAP). Leonard Green & Partners had $232.3 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also initiated a $125.6 million position during the quarter. The other funds with brand new SNAP positions are Josh Resnick’s Jericho Capital Asset Management, Sanjay Venkat’s Jeneq Management, and David Fiszel’s Honeycomb Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Snap Inc. (NYSE:SNAP) but similarly valued. These stocks are Prologis Inc (NYSE:PLD), Truist Financial Corporation (NYSE:TFC), The Bank of Nova Scotia (NYSE:BNS), China Petroleum & Chemical Corp (NYSE:SNP), FedEx Corporation (NYSE:FDX), Zoetis Inc (NYSE:ZTS), and Crown Castle International Corp. (NYSE:CCI). This group of stocks’ market valuations are similar to SNAP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLD | 39 | 771817 | 3 |
| TFC | 36 | 845826 | -4 |
| BNS | 19 | 239536 | 0 |
| SNP | 11 | 210183 | -2 |
| FDX | 63 | 2263772 | 0 |
| ZTS | 58 | 3124680 | -3 |
| CCI | 43 | 1995629 | 3 |
| Average | 38.4 | 1350206 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.4 hedge funds with bullish positions and the average amount invested in these stocks was $1350 million. That figure was $4324 million in SNAP’s case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Snap Inc. (NYSE:SNAP) is more popular among hedge funds. Our overall hedge fund sentiment score for SNAP is 90. 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 returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on SNAP as the stock returned 22.6% since the end of March (through 6/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
