Hedge Funds Have Never Been This Bullish On Affirm Holdings, Inc. (AFRM)

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 Affirm Holdings, Inc. (NASDAQ:AFRM).

Is Affirm Holdings, Inc. (NASDAQ:AFRM) ready to rally soon? Hedge funds were getting more optimistic. The number of bullish hedge fund positions increased by 14 recently. Affirm Holdings, Inc. (NASDAQ:AFRM) was in 39 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AFRM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 25 hedge funds in our database with AFRM 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. Keeping this in mind we’re going to go over the new hedge fund action encompassing Affirm Holdings, Inc. (NASDAQ:AFRM).

Philippe Laffont of Coatue Management

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

At the end of the third quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 56% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards AFRM over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Melvin Capital Management was the largest shareholder of Affirm Holdings, Inc. (NASDAQ:AFRM), with a stake worth $381.2 million reported as of the end of September. Trailing Melvin Capital Management was Melvin Capital Management, which amassed a stake valued at $274 million. Abdiel Capital Advisors, Citadel Investment Group, and Coatue 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 ThornTree Capital Partners allocated the biggest weight to Affirm Holdings, Inc. (NASDAQ:AFRM), around 9.22% of its 13F portfolio. Ogborne Capital is also relatively very bullish on the stock, designating 8.44 percent of its 13F equity portfolio to AFRM.

As one would reasonably expect, some big names have been driving this bullishness. Melvin Capital Management, managed by Gabriel Plotkin, established the biggest position in Affirm Holdings, Inc. (NASDAQ:AFRM). Melvin Capital Management had $381.2 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also initiated a $274 million position during the quarter. The following funds were also among the new AFRM investors: Philippe Laffont’s Coatue Management, Josh Resnick’s Jericho Capital Asset Management, and James Crichton’s Hitchwood Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Affirm Holdings, Inc. (NASDAQ:AFRM) but similarly valued. These stocks are Verisk Analytics, Inc. (NASDAQ:VRSK), EPAM Systems Inc (NYSE:EPAM), Nasdaq, Inc. (NASDAQ:NDAQ), Cummins Inc. (NYSE:CMI), Barrick Gold Corporation (NYSE:GOLD), Rocket Companies, Inc. (NYSE:RKT), and Mettler-Toledo International Inc. (NYSE:MTD). This group of stocks’ market caps resemble AFRM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $828 million. That figure was $1491 million in AFRM’s case. EPAM Systems Inc (NYSE:EPAM) is the most popular stock in this table. On the other hand Rocket Companies, Inc. (NYSE:RKT) is the least popular one with only 17 bullish hedge fund positions. Affirm Holdings, Inc. (NASDAQ:AFRM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AFRM is 84. 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. Hedge funds were also right about betting on AFRM, though not to the same extent, as the stock returned 6.3% since Q3 (through November 30th) and outperformed the market as well.

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