A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Square, Inc. (NYSE:SQ).
Is Square, Inc. (NYSE:SQ) a splendid investment now? The smart money was getting more bullish. The number of long hedge fund bets inched up by 2 in recent months. Square, Inc. (NYSE:SQ) was in 94 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 92. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SQ ranked 22nd among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 92 hedge funds in our database with SQ holdings at the end of March.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Alex Sacerdote of Whale Rock Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s check out the key hedge fund action encompassing Square, Inc. (NYSE:SQ).
Do Hedge Funds Think SQ Is A Good Stock To Buy Now?
At Q2’s end, a total of 94 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. On the other hand, there were a total of 66 hedge funds with a bullish position in SQ a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, ARK Investment Management, managed by Catherine D. Wood, holds the most valuable position in Square, Inc. (NYSE:SQ). ARK Investment Management has a $1.96 billion position in the stock, comprising 3.6% of its 13F portfolio. On ARK Investment Management’s heels is Lone Pine Capital, holding a $1.3934 billion position; the fund has 4.4% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism encompass Brian Bares’s Bares Capital Management, Philippe Laffont’s Coatue Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Kuvari Partners allocated the biggest weight to Square, Inc. (NYSE:SQ), around 23.15% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, dishing out 20.87 percent of its 13F equity portfolio to SQ.
As aggregate interest increased, key hedge funds were breaking ground themselves. Whale Rock Capital Management, managed by Alex Sacerdote, created the largest position in Square, Inc. (NYSE:SQ). Whale Rock Capital Management had $234.1 million invested in the company at the end of the quarter. Andreas Halvorsen’s Viking Global also initiated a $159.8 million position during the quarter. The other funds with new positions in the stock are Vikram Kumar’s Kuvari Partners, Glen Kacher’s Light Street Capital, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Square, Inc. (NYSE:SQ) but similarly valued. These stocks are Deere & Company (NYSE:DE), CVS Health Corporation (NYSE:CVS), Intuitive Surgical, Inc. (NASDAQ:ISRG), ServiceNow Inc (NYSE:NOW), Snap Inc. (NYSE:SNAP), Lockheed Martin Corporation (NYSE:LMT), and GlaxoSmithKline plc (NYSE:GSK). This group of stocks’ market valuations resemble SQ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DE | 52 | 2173962 | 1 |
| CVS | 67 | 1355477 | 5 |
| ISRG | 60 | 3475820 | 7 |
| NOW | 91 | 7011424 | -7 |
| SNAP | 64 | 5399955 | -9 |
| LMT | 58 | 1565723 | 8 |
| GSK | 28 | 1466364 | 3 |
| Average | 60 | 3206961 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 60 hedge funds with bullish positions and the average amount invested in these stocks was $3207 million. That figure was $10328 million in SQ’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand GlaxoSmithKline plc (NYSE:GSK) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Square, Inc. (NYSE:SQ) is more popular among hedge funds. Our overall hedge fund sentiment score for SQ is 87. 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Unfortunately SQ wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SQ were disappointed as the stock returned 4.4% since the end of the second quarter (through 10/29) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
