Is Paypal Holdings Inc (NASDAQ:PYPL) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have 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.
So, what do hedge funds think about Paypal Holdings Inc (NASDAQ:PYPL)? Prominent investors are getting more optimistic. The number of long hedge fund positions inched up by 2 in recent months. PYPL was in 86 hedge funds’ portfolios at the end of June. There were 84 hedge funds in our database with PYPL positions at the end of the previous quarter. Moreover PayPal was actually the 17th most popular stock among hedge funds at the end of the second quarter (see the list of 25 most popular stocks among hedge funds).
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 flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a gander at the latest hedge fund action encompassing Paypal Holdings Inc (NASDAQ:PYPL).
Hedge fund activity in Paypal Holdings Inc (NASDAQ:PYPL)
At Q3’s end, a total of 86 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the second quarter of 2018. On the other hand, there were a total of 68 hedge funds with a bullish position in PYPL at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Third Point, managed by Dan Loeb, holds the largest position in Paypal Holdings Inc (NASDAQ:PYPL). Third Point has a $832.7 million position in the stock, comprising 5.8% of its 13F portfolio. The second largest stake is held by Philippe Laffont of Coatue Management, with a $533.3 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain Jim O’Brien and Jonathan Dorfman’s Napier Park Global Capital, Beeneet Kothari’s Tekne Capital Management and Yen Liow’s Aravt Global.
As industrywide interest jumped, some big names have been driving this bullishness. Napier Park Global Capital, managed by Jim O’Brien and Jonathan Dorfman, initiated the most valuable position in Paypal Holdings Inc (NASDAQ:PYPL). Napier Park Global Capital had $2.5 million invested in the company at the end of the quarter. Dan Loeb’s Third Point also initiated a $832.7 million position during the quarter. The other funds with brand new PYPL positions are Alok Agrawal’s Bloom Tree Partners, Anna Nikolayevsky’s Axel Capital Management, and Francis Cueto’s Asturias Capital.
Let’s now review hedge fund activity in other stocks similar to Paypal Holdings Inc (NASDAQ:PYPL). We will take a look at Booking Holdings Inc. (NASDAQ:BKNG), Rio Tinto plc (ADR) (NYSE:RIO), Schlumberger Limited. (NYSE:SLB), and Eli Lilly & Co. (NYSE:LLY). This group of stocks’ market valuations are similar to PYPL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BKNG | 70 | 6678582 | -5 |
| RIO | 20 | 793930 | 2 |
| SLB | 43 | 1599488 | -9 |
| LLY | 33 | 1377697 | -2 |
As you can see these stocks had an average of 41.5 hedge funds with bullish positions and the average amount invested in these stocks was $2612 million. That figure was $4904 million in PYPL’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Rio Tinto plc (ADR) (NYSE:RIO) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Paypal Holdings Inc (NASDAQ:PYPL) is more popular among hedge funds.
At the beginning of this year we identified Paypal as one of the 5 stocks that were favored both by insiders and hedge funds, and the stock outperformed the market. Considering that hedge funds are still fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
