At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Snap Inc. (NYSE:SNAP) makes for a good investment right now.
Is SNAP a good stock to buy now? The best stock pickers were taking a bullish view. The number of long hedge fund bets inched up by 2 recently. Snap Inc. (NYSE:SNAP) was in 51 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 66. Our calculations also showed that SNAP isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Today there are tons of metrics shareholders use to grade stocks. A duo of the best metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best investment managers can trounce their index-focused peers by a healthy amount (see the details here).
Robert Pohly of Samlyn Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to check out the fresh hedge fund action encompassing Snap Inc. (NYSE:SNAP).
What have hedge funds been doing with Snap Inc. (NYSE:SNAP)?
At the end of September, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SNAP over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Snap Inc. (NYSE:SNAP) was held by Citadel Investment Group, which reported holding $156.2 million worth of stock at the end of September. It was followed by D E Shaw with a $138 million position. Other investors bullish on the company included Samlyn Capital, Slate Path Capital, and Dorsal Capital Management. In terms of the portfolio weights assigned to each position Voleon Capital allocated the biggest weight to Snap Inc. (NYSE:SNAP), around 9.09% of its 13F portfolio. Dorsal Capital Management is also relatively very bullish on the stock, setting aside 7.81 percent of its 13F equity portfolio to SNAP.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Atreides Management, managed by Gavin Baker, established the most valuable position in Snap Inc. (NYSE:SNAP). Atreides Management had $48.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $41.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, and Robert M. P. Luciano’s VGI Partners.
Let’s now review hedge fund activity in other stocks similar to Snap Inc. (NYSE:SNAP). These stocks are Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), Carvana Co. (NYSE:CVNA), General Mills, Inc. (NYSE:GIS), Electronic Arts Inc. (NASDAQ:EA), Cognizant Technology Solutions Corp (NASDAQ:CTSH), Bank of Montreal (NYSE:BMO), and BCE Inc. (NYSE:BCE). All of these stocks’ market caps are similar to SNAP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMFG | 8 | 88240 | -2 |
| CVNA | 53 | 6020303 | -4 |
| GIS | 36 | 1054191 | -1 |
| EA | 62 | 1376224 | -5 |
| CTSH | 45 | 3326420 | 6 |
| BMO | 10 | 112811 | -3 |
| BCE | 10 | 84651 | 0 |
| Average | 32 | 1723263 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $1723 million. That figure was $1166 million in SNAP’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 8 bullish hedge fund positions. Snap Inc. (NYSE:SNAP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNAP is 70. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on SNAP as the stock returned 81.9% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
