Is Farfetch Limited (FTCH) A Good Stock To Buy?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Farfetch Limited (NYSE:FTCH) to find out whether there were any major changes in hedge funds’ views.

Is FTCH a good stock to buy? Farfetch Limited (NYSE:FTCH) shareholders have witnessed a decrease in enthusiasm from smart money recently. Farfetch Limited (NYSE:FTCH) was in 51 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 63. Our calculations also showed that FTCH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 let’s analyze the new hedge fund action encompassing Farfetch Limited (NYSE:FTCH).

Ole Andreas Halvorsen of Viking Global

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

Heading into the fourth quarter of 2021, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. On the other hand, there were a total of 40 hedge funds with a bullish position in FTCH a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Lone Pine Capital, holds the number one position in Farfetch Limited (NYSE:FTCH). Lone Pine Capital has a $860 million position in the stock, comprising 2.9% of its 13F portfolio. On Lone Pine Capital’s heels is Daniel Sundheim of D1 Capital Partners, with a $535 million position; 3% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions contain Andreas Halvorsen’s Viking Global, Brad Gerstner’s Altimeter Capital Management and Brett Barakett’s Tremblant Capital. In terms of the portfolio weights assigned to each position Cheyne Capital allocated the biggest weight to Farfetch Limited (NYSE:FTCH), around 6.47% of its 13F portfolio. StackLine Partners is also relatively very bullish on the stock, earmarking 4.52 percent of its 13F equity portfolio to FTCH.

Seeing as Farfetch Limited (NYSE:FTCH) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies that elected to cut their positions entirely in the third quarter. Interestingly, Gil Simon’s SoMa Equity Partners sold off the largest investment of the 750 funds followed by Insider Monkey, worth close to $201.4 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund sold off about $193.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 12 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Farfetch Limited (NYSE:FTCH) but similarly valued. We will take a look at American Airlines Group Inc (NASDAQ:AAL), Teck Resources Ltd (NYSE:TECK), Open Text Corporation (NASDAQ:OTEX), Crown Holdings, Inc. (NYSE:CCK), Athene Holding Ltd. (NYSE:ATH), Icahn Enterprises LP (NASDAQ:IEP), and CBOE Global Markets Inc (NASDAQ:CBOE). This group of stocks’ market caps are closest to FTCH’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $2789 million. That figure was $3259 million in FTCH’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 4 bullish hedge fund positions. Farfetch Limited (NYSE:FTCH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FTCH is 66.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market again by 5.6 percentage points. Unfortunately FTCH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FTCH were disappointed as the stock returned -8.2% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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