We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Snap Inc. (NYSE:SNAP) and determine whether hedge funds skillfully traded this stock.
Is Snap Inc. (NYSE:SNAP) the right pick for your portfolio? The best stock pickers were becoming more confident. The number of long hedge fund positions went up by 14 in recent months. Snap Inc. (NYSE:SNAP) was in 78 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 73. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SNAP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
David E. Shaw of D.E. Shaw
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a look at the latest hedge fund action regarding Snap Inc. (NYSE:SNAP).
Do Hedge Funds Think SNAP Is A Good Stock To Buy Now?
At the end of September, a total of 78 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the second quarter of 2021. By comparison, 51 hedge funds held shares or bullish call options in SNAP a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Lone Pine Capital was the largest shareholder of Snap Inc. (NYSE:SNAP), with a stake worth $1672.3 million reported as of the end of September. Trailing Lone Pine Capital was D E Shaw, which amassed a stake valued at $662.3 million. Melvin Capital Management, Citadel Investment Group, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hunt Lane Capital allocated the biggest weight to Snap Inc. (NYSE:SNAP), around 10.14% of its 13F portfolio. Dorsal Capital Management is also relatively very bullish on the stock, designating 9.3 percent of its 13F equity portfolio to SNAP.
Consequently, key hedge funds were leading the bulls’ herd. Melvin Capital Management, managed by Gabriel Plotkin, assembled the most outsized call position in Snap Inc. (NYSE:SNAP). Melvin Capital Management had $369 million invested in the company at the end of the quarter. Panayotis Takis Sparaggis’s Alkeon Capital Management also initiated a $221.6 million position during the quarter. The following funds were also among the new SNAP investors: Rajiv Jain’s GQG Partners, Leon Shaulov’s Maplelane Capital, and Leon Shaulov’s Maplelane Capital.
Let’s also examine hedge fund activity in other stocks similar to Snap Inc. (NYSE:SNAP). These stocks are Applied Materials, Inc. (NASDAQ:AMAT), Pinduoduo Inc. (NASDAQ:PDD), General Electric Company (NYSE:GE), Diageo plc (NYSE:DEO), JD.Com Inc (NASDAQ:JD), CVS Health Corporation (NYSE:CVS), and Target Corporation (NYSE:TGT). All of these stocks’ market caps match SNAP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMAT | 68 | 4320480 | -5 |
| PDD | 49 | 3538156 | 0 |
| GE | 53 | 6244560 | -14 |
| DEO | 18 | 703948 | -2 |
| JD | 66 | 9057155 | -10 |
| CVS | 61 | 1060624 | -6 |
| TGT | 49 | 4349899 | -17 |
| Average | 52 | 4182117 | -7.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 52 hedge funds with bullish positions and the average amount invested in these stocks was $4182 million. That figure was $6739 million in SNAP’s case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Snap Inc. (NYSE:SNAP) is more popular among hedge funds. Our overall hedge fund sentiment score for SNAP is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, SNAP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SNAP were disappointed as the stock returned -55.9% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
