Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Paypal Holdings Inc (NASDAQ:PYPL).
Paypal Holdings Inc (NASDAQ:PYPL) has experienced a decrease in enthusiasm from smart money lately. Our calculations also showed that PYPL is among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Philippe Laffont of Coatue Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the new hedge fund action encompassing Paypal Holdings Inc (NASDAQ:PYPL).
Hedge fund activity in Paypal Holdings Inc (NASDAQ:PYPL)
Heading into the second quarter of 2020, a total of 118 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the fourth quarter of 2019. By comparison, 93 hedge funds held shares or bullish call options in PYPL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the largest position in Paypal Holdings Inc (NASDAQ:PYPL), worth close to $670.5 million, amounting to 0.8% of its total 13F portfolio. The second most bullish fund manager is Lone Pine Capital, founded by Stephen Mandel, which holds a $504.1 million position; the fund has 3% of its 13F portfolio invested in the stock. Remaining peers that hold long positions consist of Philippe Laffont’s Coatue Management, Chase Coleman’s Tiger Global Management LLC and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Ogborne Capital allocated the biggest weight to Paypal Holdings Inc (NASDAQ:PYPL), around 24.91% of its 13F portfolio. Portland Hill Asset Management is also relatively very bullish on the stock, setting aside 14.09 percent of its 13F equity portfolio to PYPL.
Judging by the fact that Paypal Holdings Inc (NASDAQ:PYPL) has experienced declining sentiment from hedge fund managers, logic holds that there were a few hedgies who sold off their entire stakes last quarter. Interestingly, Ricky Sandler’s Eminence Capital dropped the largest stake of the 750 funds watched by Insider Monkey, valued at about $139.3 million in stock. Aaron Cowen’s fund, Suvretta Capital Management, also dumped its stock, about $120.8 million worth. These moves are important to note, as total hedge fund interest fell by 8 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Paypal Holdings Inc (NASDAQ:PYPL). We will take a look at ASML Holding N.V. (NASDAQ:ASML), Sanofi (NASDAQ:SNY), Accenture Plc (NYSE:ACN), and Charter Communications, Inc. (NASDAQ:CHTR). All of these stocks’ market caps are similar to PYPL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASML | 30 | 1505012 | 8 |
| SNY | 15 | 970814 | -16 |
| ACN | 49 | 1003250 | 8 |
| CHTR | 104 | 9914920 | 39 |
| Average | 49.5 | 3348499 | 9.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 49.5 hedge funds with bullish positions and the average amount invested in these stocks was $3348 million. That figure was $4659 million in PYPL’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand Sanofi (NASDAQ:SNY) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Paypal Holdings Inc (NASDAQ:PYPL) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on PYPL as the stock returned 57.6% so far in Q2 (through May 22nd) 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.
Disclosure: None. This article was originally published at Insider Monkey.
