Social Media Stocks Hedge Funds Like

Indeed, the world of media has been changing at an extremely high pace in recent years and decades. For instance, spending on media continues to transition from traditional to digital products and services. In fact, analysts and economists anticipate digital spending to account for more than 50% of overall media spend by 2019.

The rapid digital shift, fueled by the growing number of connected consumers and the expansion of mobile telephony, will continue to have a structural effect on almost all media sub-sectors. Hence, media companies need to answer the following question in order to successfully navigate today’s fast-changing landscape: How can we advance through all the noise and attract or retain consumer attention? Given today’s high uncertainty within the media space, investors might find it extremely troublesome to select the appropriate social media stocks for their portfolios. For that reason, Insider Monkey decided to compile a list of social media stocks favored by the hedge funds followed by our team. So let’s have a look at the five most popular social media stocks among the extensive pool of hedge funds tracked by Insider Monkey.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

#5. MeetMe Inc. (NASDAQ:MEET)

– Number of Hedge Fund Shareholders (as of June 30): 14

– Total Value of Hedge Funds’ Holdings (as of June 30): $27.73 Million

MeetMe Inc. (NASDAQ:MEET) was a hedge fund “darling” in the second quarter, as the number of funds from our system with long positions in the company spiked to 14 from eight quarter-over-quarter. Similarly, the overall value of those positions rose by an impressive 80% quarter-on-quarter to $27.73 million, primarily due to an almost 88% increase in the value of MeetMe shares. The shares of the location-based social network for meeting new people are up 64% thus far in 2016 despite experiencing a major pullback in mid-August. Just recently, analysts at JMP Securities reiterated their ‘Market Outperform’ rating on the dating site company and the price target of $9, saying that “the recent sell-off in MEET shares is unjustified and we recommend taking advantage of shares at these levels.” Several reports recently criticized the company’s ad model and the activity of MeetMe users, putting strong downward pressure on MeetMe shares. Jim Simons’ Renaissance Technologies LLC upped its position in MeetMe Inc. (NASDAQ:MEET) by 68% during the June quarter to around 762,000 shares.

#4. SINA Corp (NASDAQ:SINA)

– Number of Hedge Fund Shareholders (as of June 30): 21

– Total Value of Hedge Funds’ Holdings (as of June 30): $525.42 Million

SINA Corp (NASDAQ:SINA) also received some love from the segment of the hedge fund industry tracked by Insider Monkey during the April-to-June quarter, with the number of bullish smart money investors on the company increasing to 21 from 15 quarter-on-quarter. At the same time, the aggregate value of those investors’ stakes in SINA rose by 79% quarter-over-quarter to $525.42 million, partially driven by a 9% gain in the value of SINA shares. The 21 hedge fund shareholders accumulated nearly 15% of the company’s total number of outstanding shares. At the end of August, Chinese online media company SINA announced plans to distribute part of its stake in Weibo Corp (ADR) (NASDAQ:WB), the Chinese social media operator that is currently trading near record highs, to shareholders. SINA will distribute one Weibo Class A ordinary share for each ten SINA ordinary shares. After the distribution of the Weibo shares, SINA’s equity stake in Weibo will decline to 51% from 54%. SINA has seen its market value skyrocket by 65% since the beginning of 2016, helped by strong performance delivered by microblog portal Weibo. Kerr Neilson’s Platinum Asset Management was the owner of 5.21 million shares of SINA Corp (NASDAQ:SINA) at the end of the second quarter.

#3. Twitter Inc. (NYSE:TWTR)

– Number of Hedge Fund Shareholders (as of June 30): 30

– Total Value of Hedge Funds’ Holdings (as of June 30): $354.92 Million

The number of hedge funds from our system with equity stakes in Twitter Inc. (NYSE:TWTR) increased to 30 from 27 during the three months that ended June 30. Nevertheless, the aggregate value of those stakes fell by nearly 14% quarter-over-quarter to $354.92 million despite a 2% gain in the value of Twitter’s stock. Hence, some hedge fund shareholders of Twitter drastically trimmed their exposure to the microblogging platform company during the June quarter. It is fairly safe to say that Twitter’s stock performance has been tightly tied to takeover rumors lately. The company’s recent stock performance seems to reflect rumors, reports or hopes that Twitter could become the target of activist investors or become a takeover target. However, some analysts believe that the possibility of an immediate change in the company’s direction is not extremely high over the next year or so. Twitter shares are 15% in the red thus far in 2016. Jim Simons’ Renaissance Technologies LLC had 3.16 million shares of Twitter Inc. (NYSE:TWTR) among its holdings at the end of June.

#2. LinkedIn Corp (NYSE:LNKD)

– Number of Hedge Fund Shareholders (as of June 30): 66

– Total Value of Hedge Funds’ Holdings (as of June 30): $4.06 Billion

There were 66 hedge fund firms from our system with equity investments in LinkedIn Corp (NYSE:LNKD) at the end of the April-to-June quarter, up from 41 firms recorded at the end of the previous quarter. Microsoft Corporation (NASDAQ:MSFT)’s $26.2 billion-offer to acquire the world’s largest professional network on the Internet caught the attention of merger arbitrageurs. In mid-June, the computer giant agreed to acquire control of LinkedIn for $196 per share, so some hedge funds might be attempting to monetize on the difference between LinkedIn’s current share price of slightly under $193 a share and the aforementioned offer price. The multi-billion-dollar deal is anticipated to complete by the end of the current calendar year. Adage Capital Management, founded by Phillip Gross and Robert Atchinson, acquired a new stake of 770,000 shares of LinkedIn Corp (NYSE:LNKD) during the second quarter.

#1. Facebook Inc. (NASDAQ:FB)

– Number of Hedge Fund Shareholders (as of June 30): 148

– Total Value of Hedge Funds’ Holdings (as of June 30): $15.24 Billion

Facebook Inc. (NASDAQ:FB) fell out of favor with the hedge funds followed by Insider Monkey during the three months that ended June quarter, with the number of funds invested in the social network giant falling to 148 from 164 quarter-over-quarter. Nonetheless, the aggregate value of those funds’ stakes in Facebook rose by 5% quarter-on-quarter to $15.24 billion, so some remaining Facebook shareholders upped their exposure to the company quite significantly (the stock was flat in the second quarter). Well-known short-seller Andrew Left of Citron Research believes the social media giant will “become a tremendous short once the engagement numbers slip.” According to Mr. Left, Facebook’s growth story could resemble Apple Inc. (NASDAQ:AAPL)’s story. Put it differently, the short-seller anticipates Facebook to turn into a value play from a growth play just like the iPhone maker. Facebook has seen its market capitalization jump by 20% since the start of the year. Andreas Halvorsen’s Viking Global reported owning 20.14 million shares of Facebook Inc. (NASDAQ:FB) in its 13F for the June quarter.

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