Were Hedge Funds Right About Amazon.com (AMZN)?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Amazon.com, Inc. (NASDAQ:AMZN) to find out whether there were any major changes in hedge funds’ views.

Is Amazon.com, Inc. (NASDAQ:AMZN) the right pick for your portfolio? Investors who are in the know were getting more optimistic. The number of bullish hedge fund bets went up by 28 during the second quarter. Amazon.com, Inc. (NASDAQ:AMZN) was in 271 hedge funds’ portfolios at the end of June. The all time high for this statistic is 273. Our calculations also showed that AMZN ranked #1 among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you’d ask most stock holders, hedge funds are seen as underperforming, old financial vehicles of the past. While there are more than 8000 funds with their doors open at present, Our experts look at the elite of this club, about 850 funds. These hedge fund managers control the lion’s share of all hedge funds’ total asset base, and by monitoring their matchless stock picks, Insider Monkey has identified a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Now we’re going to take a glance at the fresh hedge fund action surrounding Amazon.com, Inc. (NASDAQ:AMZN).

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

At the end of June, a total of 271 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. On the other hand, there were a total of 248 hedge funds with a bullish position in AMZN a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable call position in Amazon.com, Inc. (NASDAQ:AMZN), worth close to $13.1283 billion, accounting for 2.9% of its total 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, led by Ken Fisher, holding a $6.4506 billion position; 4.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish consist of Masayoshi Son’s SB Management, Boykin Curry’s Eagle Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position SB Management allocated the biggest weight to Amazon.com, Inc. (NASDAQ:AMZN), around 66.47% of its 13F portfolio. Skye Global Management is also relatively very bullish on the stock, earmarking 25.43 percent of its 13F equity portfolio to AMZN.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Amazon.com, Inc. (NASDAQ:AMZN) headfirst. OZ Management, managed by Daniel S. Och, established the biggest call position in Amazon.com, Inc. (NASDAQ:AMZN). OZ Management had $825.6 million invested in the company at the end of the quarter. Soroban Capital Partners also made a $688 million investment in the stock during the quarter. The other funds with new positions in the stock are Panayotis Takis Sparaggis’s Alkeon Capital Management, Seth Wunder’s Black-and-White Capital, and Gabriel Plotkin’s Melvin Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Amazon.com, Inc. (NASDAQ:AMZN) but similarly valued. We will take a look at Alphabet Inc (NASDAQ:GOOGL), Facebook Inc (NASDAQ:FB), Tesla Inc. (NASDAQ:TSLA), Berkshire Hathaway Inc. (NYSE:BRK-B), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Alibaba Group Holding Limited (NYSE:BABA), and Visa Inc (NYSE:V). This group of stocks’ market valuations are closest to AMZN’s market valuation.

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As you can see these stocks had an average of 143.4 hedge funds with bullish positions and the average amount invested in these stocks was $22280 million. That figure was $60492 million in AMZN’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand Tesla Inc. (NASDAQ:TSLA) is the least popular one with only 60 bullish hedge fund positions. Compared to these stocks Amazon.com, Inc. (NASDAQ:AMZN) is more popular among hedge funds. Our overall hedge fund sentiment score for AMZN is 99.8. 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 AMZN wasn’t nearly as successful as these 5 stocks this year and hedge funds that were betting on AMZN were disappointed as the stock returned -2% 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.