We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like LendingTree, Inc (NASDAQ:TREE).
Is LendingTree, Inc (NASDAQ:TREE) a buy, sell, or hold? The smart money is in a pessimistic mood. The number of long hedge fund bets shrunk by 7 in recent months. Our calculations also showed that TREE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Tom Brown of Second Curve Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s review the latest hedge fund action surrounding LendingTree, Inc (NASDAQ:TREE).
How are hedge funds trading LendingTree, Inc (NASDAQ:TREE)?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in TREE a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of LendingTree, Inc (NASDAQ:TREE), with a stake worth $17.5 million reported as of the end of September. Trailing Renaissance Technologies was G2 Investment Partners Management, which amassed a stake valued at $11.9 million. D E Shaw, PAR Capital Management, and PDT Partners 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 G2 Investment Partners Management allocated the biggest weight to LendingTree, Inc (NASDAQ:TREE), around 3.38% of its 13F portfolio. P.A.W. Capital Partners is also relatively very bullish on the stock, earmarking 1.55 percent of its 13F equity portfolio to TREE.
Since LendingTree, Inc (NASDAQ:TREE) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few fund managers that elected to cut their entire stakes last quarter. Intriguingly, Mike Ogborne’s Ogborne Capital cut the largest position of all the hedgies tracked by Insider Monkey, valued at an estimated $10 million in stock. Donald Sussman’s fund, Paloma Partners, also sold off its stock, about $9.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to LendingTree, Inc (NASDAQ:TREE). We will take a look at Cushman & Wakefield plc (NYSE:CWK), FirstService Corporation (NASDAQ:FSV), Solaredge Technologies Inc (NASDAQ:SEDG), and Cimpress plc (NASDAQ:CMPR). This group of stocks’ market values match TREE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CWK | 10 | 156714 | -4 |
| FSV | 12 | 163650 | 2 |
| SEDG | 20 | 220192 | -3 |
| CMPR | 9 | 705142 | -3 |
| Average | 12.75 | 311425 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $85 million in TREE’s case. Solaredge Technologies Inc (NASDAQ:SEDG) is the most popular stock in this table. On the other hand Cimpress plc (NASDAQ:CMPR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks LendingTree, Inc (NASDAQ:TREE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on TREE as the stock returned 16.1% during the first two months of Q4 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.
