“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
The Trade Desk, Inc. (NASDAQ:TTD) was in 14 hedge funds’ portfolios at the end of September. TTD has experienced an increase in hedge fund interest of late. There were 13 hedge funds in our database with TTD holdings at the end of the previous quarter. Our calculations also showed that TTD isn’t among the 30 most popular stocks among hedge funds.
In the 21st century investor’s toolkit there are a lot of indicators investors can use to size up stocks. Some of the most useful indicators are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce the S&P 500 by a significant amount (see the details here).
Let’s take a glance at the fresh hedge fund action surrounding The Trade Desk, Inc. (NASDAQ:TTD).
Hedge fund activity in The Trade Desk, Inc. (NASDAQ:TTD)
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in TTD heading into this year. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of The Trade Desk, Inc. (NASDAQ:TTD), with a stake worth $115.8 million reported as of the end of September. Trailing D E Shaw was Renaissance Technologies, which amassed a stake valued at $78.4 million. Citadel Investment Group, PEAK6 Capital Management, and PEAK6 Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, some big names were breaking ground themselves. Tairen Capital, managed by Larry Chen and Terry Zhang, created the largest position in The Trade Desk, Inc. (NASDAQ:TTD). Tairen Capital had $6.2 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $3.7 million position during the quarter. The following funds were also among the new TTD investors: Principal Global Investors’s Columbus Circle Investors, Guy Shahar’s DSAM Partners, and Frank Slattery’s Symmetry Peak Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Trade Desk, Inc. (NASDAQ:TTD) but similarly valued. These stocks are Charles River Laboratories International Inc. (NYSE:CRL), Arrow Electronics, Inc. (NYSE:ARW), Transocean Ltd (NYSE:RIG), and Douglas Emmett, Inc. (NYSE:DEI). This group of stocks’ market valuations are closest to TTD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRL | 20 | 736924 | 0 |
| ARW | 23 | 509427 | 6 |
| RIG | 42 | 861336 | 9 |
| DEI | 14 | 345417 | 3 |
| Average | 24.75 | 613276 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $613 million. That figure was $233 million in TTD’s case. Transocean Ltd (NYSE:RIG) is the most popular stock in this table. On the other hand Douglas Emmett, Inc. (NYSE:DEI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks The Trade Desk, Inc. (NASDAQ:TTD) is even less popular than DEI. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
