Was The Smart Money Right About Twitter Inc (TWTR)?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Twitter Inc (NYSE:TWTR).

Twitter Inc (NYSE:TWTR) investors should pay attention to an increase in hedge fund sentiment lately. Twitter Inc (NYSE:TWTR) was in 78 hedge funds’ portfolios at the end of December. The all time high for this statistic is 75. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TWTR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let’s check out the fresh hedge fund action surrounding Twitter Inc (NYSE:TWTR).

Do Hedge Funds Think TWTR Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 78 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TWTR over the last 22 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

More specifically, SRS Investment Management was the largest shareholder of Twitter Inc (NYSE:TWTR), with a stake worth $414.5 million reported as of the end of December. Trailing SRS Investment Management was Southpoint Capital Advisors, which amassed a stake valued at $270.8 million. Appaloosa Management LP, Citadel Investment Group, and Elliott Investment Management 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 Ivy Lane Capital allocated the biggest weight to Twitter Inc (NYSE:TWTR), around 16.32% of its 13F portfolio. Tiger Legatus Capital is also relatively very bullish on the stock, setting aside 9.48 percent of its 13F equity portfolio to TWTR.

As aggregate interest increased, key money managers were breaking ground themselves. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, created the most valuable position in Twitter Inc (NYSE:TWTR). Senator Investment Group had $54.2 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $38.2 million investment in the stock during the quarter. The following funds were also among the new TWTR investors: Jack Woodruff’s Candlestick Capital Management, Israel Englander’s Millennium Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks similar to Twitter Inc (NYSE:TWTR). These stocks are TAL Education Group (NYSE:TAL), Marriott International Inc (NASDAQ:MAR), Enterprise Products Partners L.P. (NYSE:EPD), ConocoPhillips (NYSE:COP), General Dynamics Corporation (NYSE:GD), IDEXX Laboratories, Inc. (NASDAQ:IDXX), and Constellation Brands, Inc. (NYSE:STZ). This group of stocks’ market values are similar to TWTR’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.3 hedge funds with bullish positions and the average amount invested in these stocks was $2260 million. That figure was $2777 million in TWTR’s case. Marriott International Inc (NASDAQ:MAR) is the most popular stock in this table. On the other hand TAL Education Group (NYSE:TAL) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Twitter Inc (NYSE:TWTR) is more popular among hedge funds. Our overall hedge fund sentiment score for TWTR is 88. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on TWTR as the stock returned 25.5% since the end of December (through 4/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.