Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Amazon.com, Inc. (NASDAQ:AMZN)? The smart money sentiment can provide an answer to this question.
Amazon.com, Inc. (NASDAQ:AMZN) investors should pay attention to an increase in enthusiasm from smart money in recent months. Amazon.com, Inc. (NASDAQ:AMZN) was in 273 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was 251. This means the bullish number of hedge fund positions in this stock reached a brand new all time high at the end of 2020. There were 245 hedge funds in our database with AMZN positions at the end of the third quarter. Our calculations also showed that AMZN ranked #1 among the 30 most popular stocks among hedge funds (click for Q4 rankings). It may be a bit too early to decide whether hedge funds were right about piling into Amazon, but we will still give it a try.
Chase Coleman of Tiger Global
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 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 take a glance at the new hedge fund action encompassing Amazon.com, Inc. (NASDAQ:AMZN).
Do Hedge Funds Think AMZN Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 273 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in AMZN over the last 22 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, SB Management was the largest shareholder of Amazon.com, Inc. (NASDAQ:AMZN), with a stake worth $7386.3 million reported as of the end of December. Trailing SB Management was Fisher Asset Management, which amassed a stake valued at $5753.7 million. Arrowstreet Capital, D E Shaw, and Tiger Global Management LLC 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 SB Management allocated the biggest weight to Amazon.com, Inc. (NASDAQ:AMZN), around 41.74% of its 13F portfolio. VGI Partners is also relatively very bullish on the stock, designating 26.36 percent of its 13F equity portfolio to AMZN.
As industrywide interest jumped, specific money managers have jumped into Amazon.com, Inc. (NASDAQ:AMZN) headfirst. Rokos Capital Management, managed by Chris Rokos, initiated the most valuable position in Amazon.com, Inc. (NASDAQ:AMZN). Rokos Capital Management had $382.7 million invested in the company at the end of the quarter. Daniel Sundheim’s D1 Capital Partners also initiated a $365.4 million position during the quarter. The other funds with brand new AMZN positions are John Smith Clark’s Southpoint Capital Advisors, Barry Dargan’s Intermede Investment Partners, and Jeffrey Talpins’s Element Capital Management.
Let’s check out hedge fund activity in other stocks similar to Amazon.com, Inc. (NASDAQ:AMZN). We will take a look at Alphabet Inc (NASDAQ:GOOGL), Facebook Inc (NASDAQ:FB), Tesla Inc. (NASDAQ:TSLA), Alibaba Group Holding Limited (NYSE:BABA), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Berkshire Hathaway Inc. (NYSE:BRK-B), and Visa Inc (NYSE:V). All of these stocks’ market caps are closest to AMZN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GOOGL | 179 | 21902583 | 17 |
| FB | 242 | 38233910 | 12 |
| TSLA | 68 | 12308025 | 1 |
| BABA | 156 | 17892090 | -10 |
| TSM | 72 | 11843403 | 5 |
| BRK-B | 110 | 20795968 | 1 |
| V | 166 | 23599162 | 6 |
| Average | 141.9 | 20939306 | 4.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 141.9 hedge funds with bullish positions and the average amount invested in these stocks was $20939 million. That figure was $51531 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 68 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 100. 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 gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Unfortunately AMZN wasn’t nearly as successful as these 30 stocks in 2021 and hedge funds that were betting on AMZN were disappointed as the stock returned 3.5% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of the top 30 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.
