How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Snap Inc. (NYSE:SNAP).
Snap Inc. (NYSE:SNAP) was in 64 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 73. SNAP investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 73 hedge funds in our database with SNAP holdings at the end of March. Our calculations also showed that SNAP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
John Overdeck of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. 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. 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 we’re going to go over the latest hedge fund action encompassing Snap Inc. (NYSE:SNAP).
Do Hedge Funds Think SNAP Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SNAP over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Lone Pine Capital, holds the biggest position in Snap Inc. (NYSE:SNAP). Lone Pine Capital has a $1.5633 billion position in the stock, comprising 4.9% of its 13F portfolio. The second most bullish fund manager is D E Shaw, led by D. E. Shaw, holding a $706 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish include Ken Griffin’s Citadel Investment Group, John Overdeck and David Siegel’s Two Sigma Advisors and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Jeneq Management allocated the biggest weight to Snap Inc. (NYSE:SNAP), around 9.42% of its 13F portfolio. Dorsal Capital Management is also relatively very bullish on the stock, dishing out 8.2 percent of its 13F equity portfolio to SNAP.
Because Snap Inc. (NYSE:SNAP) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of money managers that elected to cut their entire stakes by the end of the second quarter. At the top of the heap, Aaron Cowen’s Suvretta Capital Management dropped the largest position of all the hedgies watched by Insider Monkey, totaling about $125.6 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $64.3 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 9 funds by the end of the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Snap Inc. (NYSE:SNAP) but similarly valued. These stocks are Lockheed Martin Corporation (NYSE:LMT), GlaxoSmithKline plc (NYSE:GSK), S&P Global Inc. (NYSE:SPGI), Stryker Corporation (NYSE:SYK), Micron Technology, Inc. (NASDAQ:MU), Moderna, Inc. (NASDAQ:MRNA), and Uber Technologies, Inc. (NYSE:UBER). This group of stocks’ market values match SNAP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LMT | 58 | 1565723 | 8 |
| GSK | 28 | 1466364 | 3 |
| SPGI | 71 | 7278360 | 5 |
| SYK | 48 | 3369193 | 2 |
| MU | 87 | 6333058 | -13 |
| MRNA | 37 | 5754554 | -2 |
| UBER | 135 | 10412577 | 5 |
| Average | 66.3 | 5168547 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 66.3 hedge funds with bullish positions and the average amount invested in these stocks was $5169 million. That figure was $5400 million in SNAP’s case. Uber Technologies, Inc. (NYSE:UBER) 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. Snap Inc. (NYSE:SNAP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SNAP is 39.1. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 2.3 percentage points. Unfortunately SNAP wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SNAP investors were disappointed as the stock returned -22.8% since the end of June (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 in 2021.
Follow Snap Inc (NYSE:SNAP)
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Disclosure: None. This article was originally published at Insider Monkey.
