The 5 Social Networking Stocks That Hedge Funds Are Most Bullish On

Social networking stocks have been in the news constantly this year. Be it the rise of Facebook Inc (NASDAQ:FB), the downfall of Twitter Inc (NYSE:TWTR), or the acquisition of LinkedIn Corp (NYSE:LNKD), every move made by these companies that have reshaped our lives and how we interact with one another has been dissected and analyzed by investment gurus and other market participants. However, all of this information doesn’t necessarily make the job of an investor easier; rather it makes it even more complicated, as one has to regularly decide whether the information in question is of any significance or is just more noise.

Considering the troubles that a regular investor has to go through while selecting the appropriate social media stocks for his or her portfolio, we at Insider Monkey decided to compile a list of social media stocks based on their popularity among the hedge funds in our database, a collection of only the best hedge funds in the world. We consider hedge fund ownership of a stock to be an important metric, as hedge funds conduct a great deal of research before adding a stock to their portfolio; thus, if a large number of them are bullish on a particular stock, our research shows that the chances of that stock outperforming its peer group increases. In this article, we’ll look at the five most popular social media stocks as of Macrh 31 among the more than 765 active hedge funds that we track.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 MeetMe Inc (NASDAQ:MEET)

 – Hedge Funds With Long Positions (as of March 31): 8

 – Aggregate Value of Hedge Funds’ Holdings (as of March 31): $15.41 million

First up on our list is MeetMe Inc (NASDAQ:MEET), which continued to have eight investors in our database long the stock. Though shares of the local networking app developer have appreciated by 63% so far in 2016, they are still trading down by over 50% from the highs they hit way back in early 2011. According to most analysts, the company is highly undervalued compared to other companies with similar growth rates or EBITDA margins. They believe that if the company continues to efficiently monetize its app, the stock could see significant upside in the short-term. On June 1, analysts at Roth Capital reiterated their ‘Buy’ rating on the stock, while upping their price target on it to $5.25 from $4.75, which the stock has since quickly eclipsed. D E Shaw, founded by billionaire David E. Shaw, sold off its entire stake in the company during the first quarter, a move it is likely regretting in hindsight, as MeetMe shares have more than doubled in value since March 31.

#4 SINA Corp (NASDAQ:SINA)

 – Hedge Funds With Long Positions (as of March 31): 15

 – Aggregate Value of Hedge Funds’ Holdings (as of March 31): $293.31 million

Like MeetMe Inc, the Chinese online media company has also lost a significant chunk of its market capitalization since 2011. However, its stock has performed well this year compared to those of other Chinese companies, as it is currently trading up by 7.79% year-to-date. On May 11, SINA Corp (NASDAQ:SINA) reported its first quarter results,  which included a loss per share of $0.04 on revenue of $196.1 million, topping analysts’ expectations of a loss of $0.05 per share on revenue of $189.47 million. Hedge funds that reduced their stake in SINA Corp (NASDAQ:SINA) during the first quarter included Kerr Neilson‘s Platinum Asset Management, which trimmed its holding by 4% to 4.3 million shares.

We’ll dive into the three most popular social media stocks among the best hedge funds in the world on the next page.

#3 Twitter Inc (NYSE:TWTR)

 – Hedge Funds With Long Positions (as of March 31): 27

 – Aggregate Value of Hedge Funds’ Holdings (as of March 31): $403.16 million

Moving on, Twitter Inc (NYSE:TWTR) continued to lose popularity among the hedge funds in our database during the first quarter, as hedge fund ownership feel to 27 from 30. The announcement of the Microsoft/LinkedIn deal helped Twitter’s stock recoup some of the losses it suffered earlier this year, as the company as seen as a potential takeover candidate itself, but Twitter shares are still trading down by 22% in 2016. On June 14, technology news website Re/code revealed that Twitter has invested $70 million in audio-sharing platform SoundCloud and is considering acquiring the Berlin-based company. Billionaire Jim Simons‘ Renaissance Technologies was among the few funds that initiated a stake in Twitter Inc (NYSE:TWTR) during the first quarter, purchasing 788,900 shares.

#2 LinkedIn Corp (NYSE:LNKD)

 – Hedge Funds With Long Positions (as of March 31): 41

 – Aggregate Value of Hedge Funds’ Holdings (as of March 31): $1.38 billion

The disappointing fourth quarter results that LinkedIn Corp (NYSE:LNKD) reported in February and the fall its stock saw as a result caused several hedge funds in our system to flee the stock during the first quarter, with ownership of it falling by seven. Notable investors that sold off their entire stake in the company during the quarter included John Griffin‘s Blue Ridge Capital and Renaissance Technologies. The heavy beating that shares of the professional networking company experienced during the January-to-March period can be gauged from the fact that even after the almost 45% rise since Microsoft Corporation (NASDAQ:MSFT)‘s announcement that it would be acquiring the company for $26.2 billion, LinkedIn’s stock is still trading down by 15% year-to-date. Nonetheless, a lot of analysts still feel that Microsoft Corporation is paying too much to acquire LinkedIn Corp (NYSE:LNKD), since the latter doesn’t generate any earnings and the quality of its cash flow is low.

#1 Facebook Inc (NASDAQ:FB)

 – Hedge Funds With Long Positions (as of March 31): 164

 – Aggregate Value of Hedge Funds’ Holdings (as of March 31): $14.65 billion

With the number of shareholders of the stock rising by 18 during the first quarter, Facebook Inc (NASDAQ:FB) continued to remain the most popular social media company among the funds in our database. Shares of the social media giant are creeping back towards their all-time high reached in May and are up by 12% year-to-date. Facebook recently unveiled a new feature on its platform through which it will be able to track users’ store visits and purchases. According to analysts, this feature could prove to be a major winner for the company going forward, as the data it collects will be highly valuable to merchants and advertisers. On May 31, analysts at SunTrust reiterated their ‘Buy’ rating and $135 price target on the stock. Billionaire Andreas Halvorsen‘s Viking Global initiated a stake in Facebook Inc (NASDAQ:FB) during the first quarter, purchasing 20.13 million shares of the stock.

Disclosure: None