Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Pinterest, Inc. (NYSE:PINS)? The smart money sentiment can provide an answer to this question.
Pinterest, Inc. (NYSE:PINS) shareholders have witnessed an increase in enthusiasm from smart money recently. Our calculations also showed that PINS isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the fresh hedge fund action surrounding Pinterest, Inc. (NYSE:PINS).
What does smart money think about Pinterest, Inc. (NYSE:PINS)?
At the end of the second quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31 from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PINS over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Light Street Capital, managed by Glen Kacher, holds the largest position in Pinterest, Inc. (NYSE:PINS). Light Street Capital has a $98.8 million position in the stock, comprising 5.3% of its 13F portfolio. Coming in second is Polar Capital, led by Brian Ashford-Russell and Tim Woolley, holding a $44.2 million position; 0.4% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions encompass Amish Mehta’s SQN Investors, Dan Loeb’s Third Point and James Crichton’s Hitchwood Capital Management.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Light Street Capital, managed by Glen Kacher, assembled the largest position in Pinterest, Inc. (NYSE:PINS). Light Street Capital had $98.8 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also made a $44.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Amish Mehta’s SQN Investors, Dan Loeb’s Third Point, and James Crichton’s Hitchwood Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Pinterest, Inc. (NYSE:PINS) but similarly valued. We will take a look at SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), CenterPoint Energy, Inc. (NYSE:CNP), Sea Limited (NYSE:SE), and CarMax Inc (NYSE:KMX). This group of stocks’ market values resemble PINS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSNC | 41 | 1596822 | 4 |
| CNP | 29 | 1051355 | -5 |
| SE | 60 | 3337823 | 10 |
| KMX | 39 | 2155887 | 10 |
| Average | 42.25 | 2035472 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.25 hedge funds with bullish positions and the average amount invested in these stocks was $2035 million. That figure was $402 million in PINS’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand CenterPoint Energy, Inc. (NYSE:CNP) is the least popular one with only 29 bullish hedge fund positions. Pinterest, Inc. (NYSE:PINS) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PINS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PINS investors were disappointed as the stock returned -2.8% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks (view the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
