Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Twitter Inc (NYSE:TWTR) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Twitter Inc (NYSE:TWTR) was in 94 hedge funds’ portfolios at the end of September. The all time high for this statistic is 107. TWTR investors should pay attention to an increase in hedge fund sentiment recently. There were 89 hedge funds in our database with TWTR positions at the end of the second quarter. Our calculations also showed that TWTR ranked 24th among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Paul Singer of Elliott Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let’s view the recent hedge fund action encompassing Twitter Inc (NYSE:TWTR).
Do Hedge Funds Think TWTR Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 94 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. By comparison, 75 hedge funds held shares or bullish call options in TWTR a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Lone Pine Capital was the largest shareholder of Twitter Inc (NYSE:TWTR), with a stake worth $1300.4 million reported as of the end of September. Trailing Lone Pine Capital was ARK Investment Management, which amassed a stake valued at $832.5 million. Elliott Investment Management, SRS Investment Management, and Atreides 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 13.28% of its 13F portfolio. Nishkama Capital is also relatively very bullish on the stock, earmarking 10.62 percent of its 13F equity portfolio to TWTR.
As aggregate interest increased, some big names have been driving this bullishness. Atreides Management, managed by Gavin Baker, created the biggest call position in Twitter Inc (NYSE:TWTR). Atreides Management had $60.4 million invested in the company at the end of the quarter. David Fear’s Thunderbird Partners also made a $57.9 million investment in the stock during the quarter. The other funds with brand new TWTR positions are Leon Shaulov’s Maplelane Capital, Joshua Nash’s Ulysses Management, and Brandon Haley’s Holocene Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Twitter Inc (NYSE:TWTR) but similarly valued. These stocks are Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), Coinbase Global Inc. (NASDAQ:COIN), Eni SpA (NYSE:E), Freeport-McMoRan Inc. (NYSE:FCX), Fortinet Inc (NASDAQ:FTNT), Agilent Technologies Inc. (NYSE:A), and Enterprise Products Partners L.P. (NYSE:EPD). All of these stocks’ market caps are closest to TWTR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMFG | 11 | 50245 | 0 |
| COIN | 50 | 2968201 | 50 |
| E | 3 | 75414 | 0 |
| FCX | 66 | 3213384 | -10 |
| FTNT | 38 | 1139238 | 6 |
| A | 46 | 3135637 | 7 |
| EPD | 25 | 233255 | -3 |
| Average | 34.1 | 1545053 | 7.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $1545 million. That figure was $6306 million in TWTR’s case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 3 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 86.4. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, TWTR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TWTR were disappointed as the stock returned -37.9% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Twitter Inc. (NYSE:TWTR)
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Disclosure: None. This article was originally published at Insider Monkey.
