Shutterfly, Inc. (SFLY): Are Hedge Funds Right About This Stock?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Shutterfly, Inc. (NASDAQ:SFLY).

Is Shutterfly, Inc. (NASDAQ:SFLY) undervalued? Prominent investors are betting on the stock. The number of bullish hedge fund bets moved up by 1 recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as OM Asset Management PLC (NYSE:OMAM), Sothebys (NYSE:BID), and Shutterstock Inc (NYSE:SSTK) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What have hedge funds been doing with Shutterfly, Inc. (NASDAQ:SFLY)?

At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, an uptick of 5% from one quarter earlier. Hedge fund ownership nonetheless remains depressed from the levels seen at the beginning of the year. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Adam Wolfberg and Steven Landry’s EastBay Asset Management has the most valuable position in Shutterfly, Inc. (NASDAQ:SFLY), worth close to $98.1 million, amounting to 15% of its total 13F portfolio. Sitting at the No. 2 spot is Fine Capital Partners, managed by Debra Fine, which holds a $79.2 million position; the fund has 8.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Peter S. Park’s Park West Asset Management, Claus Moller’s P2 Capital Partners and Mario Cibelli’s Marathon Partners.

Consequently, specific money managers have been driving this bullishness. Tiger Legatus Capital, managed by Jesse Ro, assembled the most outsized position in Shutterfly, Inc. (NASDAQ:SFLY). Tiger Legatus Capital had $6.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $5.2 million investment in the stock during the quarter. The following funds were also among the new SFLY investors: Ken Griffin’s Citadel Investment Group, Brian Taylor’s Pine River Capital Management, and Philip Rosenstrach’s Pomelo Capital.

Let’s check out hedge fund activity in other stocks similar to Shutterfly, Inc. (NASDAQ:SFLY). We will take a look at OM Asset Management PLC (NYSE:OMAM), Sothebys (NYSE:BID), Shutterstock Inc (NYSE:SSTK), and American States Water Co (NYSE:AWR). This group of stocks’ market caps are similar to SFLY’s market cap.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $460 million in SFLY’s case. Sothebys (NYSE:BID) is the most popular stock in this table. On the other hand American States Water Co (NYSE:AWR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Shutterfly, Inc. (NASDAQ:SFLY) is more popular among hedge funds. Considering that hedge funds are 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