In this article we will take a look at whether hedge funds think Twilio Inc. (NYSE:TWLO) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Twilio Inc. (NYSE:TWLO) a good stock to buy now? Prominent investors were becoming hopeful. The number of long hedge fund bets moved up by 5 lately. Twilio Inc. (NYSE:TWLO) was in 71 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 66. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TWLO 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). There were 66 hedge funds in our database with TWLO holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Eashwar Krishnan of Tybourne Capital Management
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What does smart money think about Twilio Inc. (NYSE:TWLO)?
At third quarter’s end, a total of 71 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 63 hedge funds with a bullish position in TWLO a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Twilio Inc. (NYSE:TWLO) was held by SCGE Management, which reported holding $687.7 million worth of stock at the end of September. It was followed by Tiger Global Management LLC with a $467.4 million position. Other investors bullish on the company included Foxhaven Asset Management, Alkeon Capital Management, and Whale Rock Capital Management. In terms of the portfolio weights assigned to each position Foxhaven Asset Management allocated the biggest weight to Twilio Inc. (NYSE:TWLO), around 11.13% of its 13F portfolio. SCGE Management is also relatively very bullish on the stock, earmarking 10.71 percent of its 13F equity portfolio to TWLO.
As one would reasonably expect, some big names were breaking ground themselves. Tybourne Capital Management, managed by Eashwar Krishnan, created the most outsized position in Twilio Inc. (NYSE:TWLO). Tybourne Capital Management had $143.1 million invested in the company at the end of the quarter. Josh Resnick’s Jericho Capital Asset Management also initiated a $80.1 million position during the quarter. The following funds were also among the new TWLO investors: David Fiszel’s Honeycomb Asset Management, Tor Minesuk’s Mondrian Capital, and James Dinan’s York Capital Management.
Let’s now review hedge fund activity in other stocks similar to Twilio Inc. (NYSE:TWLO). These stocks are ConocoPhillips (NYSE:COP), Twitter Inc (NYSE:TWTR), Cintas Corporation (NASDAQ:CTAS), Southern Copper Corporation (NYSE:SCCO), Dow Inc. (NYSE:DOW), NXP Semiconductors NV (NASDAQ:NXPI), and Exelon Corporation (NYSE:EXC). All of these stocks’ market caps are closest to TWLO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COP | 45 | 828871 | 1 |
| TWTR | 75 | 2151017 | 7 |
| CTAS | 38 | 741729 | 4 |
| SCCO | 27 | 347458 | 8 |
| DOW | 42 | 512456 | 7 |
| NXPI | 68 | 1636793 | 1 |
| EXC | 29 | 848331 | -1 |
| Average | 46.3 | 1009522 | 3.9 |
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 $1010 million. That figure was $3475 million in TWLO’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 27 bullish hedge fund positions. Twilio Inc. (NYSE:TWLO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TWLO is 85.8. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on TWLO as the stock returned 29.1% since the end of Q3 (through 11/27) 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.
