Is Twilio Inc. (TWLO) A Good Stock To Buy?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Twilio Inc. (NYSE:TWLO).

Is TWLO a good stock to buy? Twilio Inc. (NYSE:TWLO) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Twilio Inc. (NYSE:TWLO) was in 98 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 99. There were 99 hedge funds in our database with TWLO positions at the end of the first quarter. Our calculations also showed that TWLO ranked 21st among the 30 most popular stocks among hedge funds (click for Q2 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 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Glen Kacher of Light Street Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Now we’re going to take a look at the fresh hedge fund action encompassing Twilio Inc. (NYSE:TWLO).

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

Heading into the third quarter of 2021, a total of 98 of the hedge funds tracked by Insider Monkey were long this stock, a change of -1% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TWLO over the last 24 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Among these funds, ARK Investment Management held the most valuable stake in Twilio Inc. (NYSE:TWLO), which was worth $1467.3 million at the end of the second quarter. On the second spot was SCGE Management which amassed $1097 million worth of shares. Coatue Management, Matrix Capital Management, and Alkeon Capital Management 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 Jeneq Management allocated the biggest weight to Twilio Inc. (NYSE:TWLO), around 10.46% of its 13F portfolio. SCGE Management is also relatively very bullish on the stock, setting aside 10.28 percent of its 13F equity portfolio to TWLO.

Because Twilio Inc. (NYSE:TWLO) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that decided to sell off their entire stakes in the second quarter. It’s worth mentioning that D. E. Shaw’s D E Shaw dropped the largest stake of all the hedgies tracked by Insider Monkey, totaling about $386.6 million in stock. Steve Zheng’s fund, Deepcurrents Investment Group, also dumped its stock, about $223.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds in the second quarter.

Let’s now review hedge fund activity in other stocks similar to Twilio Inc. (NYSE:TWLO). These stocks are Moody’s Corporation (NYSE:MCO), Banco Santander, S.A. (NYSE:SAN), VMware, Inc. (NYSE:VMW), Intercontinental Exchange Inc (NYSE:ICE), Norfolk Southern Corp. (NYSE:NSC), Bank of Montreal (NYSE:BMO), and Edwards Lifesciences Corporation (NYSE:EW). All of these stocks’ market caps resemble TWLO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.1 hedge funds with bullish positions and the average amount invested in these stocks was $3435 million. That figure was $7891 million in TWLO’s case. Norfolk Southern Corp. (NYSE:NSC) is the most popular stock in this table. On the other hand Bank of Montreal (NYSE:BMO) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Twilio Inc. (NYSE:TWLO) is more popular among hedge funds. Our overall hedge fund sentiment score for TWLO is 83.7. 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 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 24.1% in 2021 through September 20th and still beat the market by 6.9 percentage points. Unfortunately TWLO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TWLO were disappointed as the stock returned -14.3% since the end of the second quarter (through 9/20) 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 most of these stocks already outperformed the market since 2019.

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