Is SNAP Stock A Buy or Sell?

In this article we will check out the progression of hedge fund sentiment towards Snap Inc. (NYSE:SNAP) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is SNAP stock a buy or sell? Snap Inc. (NYSE:SNAP) has experienced an increase in hedge fund interest lately. Snap Inc. (NYSE:SNAP) was in 63 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 66. There were 51 hedge funds in our database with SNAP positions at the end of the third quarter. Our calculations also showed that SNAP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Alex Sacerdote of Whale Rock Capital Management

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

At the end of the fourth quarter, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SNAP over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Lone Pine Capital was the largest shareholder of Snap Inc. (NYSE:SNAP), with a stake worth $976.9 million reported as of the end of December. Trailing Lone Pine Capital was D E Shaw, which amassed a stake valued at $700.4 million. Arrowstreet Capital, Two Sigma Advisors, and Renaissance Technologies 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 Dorsal Capital Management allocated the biggest weight to Snap Inc. (NYSE:SNAP), around 9.41% of its 13F portfolio. EMS Capital is also relatively very bullish on the stock, designating 8.51 percent of its 13F equity portfolio to SNAP.

As one would reasonably expect, specific money managers were breaking ground themselves. Lone Pine Capital, created the largest position in Snap Inc. (NYSE:SNAP). Lone Pine Capital had $976.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $273.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Alex Sacerdote’s Whale Rock Capital Management, and Edmond M. Safra’s EMS Capital.

Let’s check out hedge fund activity in other stocks similar to Snap Inc. (NYSE:SNAP). We will take a look at Baidu, Inc. (NASDAQ:BIDU), Prologis Inc (NYSE:PLD), Colgate-Palmolive Company (NYSE:CL), Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), Gilead Sciences, Inc. (NASDAQ:GILD), Becton, Dickinson and Company (NYSE:BDX), and KE Holdings Inc (NYSE:BEKE). This group of stocks’ market values resemble SNAP’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.3 hedge funds with bullish positions and the average amount invested in these stocks was $2309 million. That figure was $4611 million in SNAP’s case. Gilead Sciences, Inc. (NASDAQ:GILD) is the most popular stock in this table. On the other hand Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) is the least popular one with only 24 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 79.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on SNAP as the stock returned 16.6% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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