The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Eventbrite, Inc. (NYSE:EB) and find out how it is affected by hedge funds’ moves.
Eventbrite, Inc. (NYSE:EB) has experienced a decrease in support from the world’s most elite money managers of late. Our calculations also showed that EB isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s review the fresh hedge fund action encompassing Eventbrite, Inc. (NYSE:EB).
How have hedgies been trading Eventbrite, Inc. (NYSE:EB)?
At Q4’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -60% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in EB a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Tiger Global Management LLC was the largest shareholder of Eventbrite, Inc. (NYSE:EB), with a stake worth $399.5 million reported as of the end of September. Trailing Tiger Global Management LLC was Alyeska Investment Group, which amassed a stake valued at $4.9 million. Point72 Asset Management, Foxhaven Asset Management, and HBK Investments were also very fond of the stock, giving the stock large weights in their portfolios.
Since Eventbrite, Inc. (NYSE:EB) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there were a few hedgies that elected to cut their positions entirely last quarter. Intriguingly, Brad Farber’s Atika Capital cut the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $4.7 million in stock, and Glen Kacher’s Light Street Capital was right behind this move, as the fund dropped about $4.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 12 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Eventbrite, Inc. (NYSE:EB). We will take a look at Beacon Roofing Supply, Inc. (NASDAQ:BECN), ProAssurance Corporation (NYSE:PRA), National Vision Holdings, Inc. (NASDAQ:EYE), and Myriad Genetics, Inc. (NASDAQ:MYGN). All of these stocks’ market caps are closest to EB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BECN | 21 | 356118 | 0 |
| PRA | 13 | 172578 | 0 |
| EYE | 15 | 340539 | -2 |
| MYGN | 19 | 259947 | -2 |
| Average | 17 | 282296 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $282 million. That figure was $415 million in EB’s case. Beacon Roofing Supply, Inc. (NASDAQ:BECN) is the most popular stock in this table. On the other hand ProAssurance Corporation (NYSE:PRA) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Eventbrite, Inc. (NYSE:EB) is even less popular than PRA. Hedge funds dodged a bullet by taking a bearish stance towards EB. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately EB wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); EB investors were disappointed as the stock returned -22% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.