As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Opendoor Technologies Inc. (NASDAQ:OPEN).
Opendoor Technologies Inc. (NASDAQ:OPEN) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 35 hedge funds’ portfolios at the end of September. Our calculations also showed that OPEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Fortune Brands Home & Security Inc (NYSE:FBHS), American Homes 4 Rent (NYSE:AMH), and Hasbro, Inc. (NASDAQ:HAS) to gather more data points.
Daniel Sundheim of D1 Capital Partners
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. Keeping this in mind we’re going to analyze the fresh hedge fund action regarding Opendoor Technologies Inc. (NASDAQ:OPEN).
Do Hedge Funds Think OPEN Is A Good Stock To Buy Now?
At the end of September, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in OPEN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Sylebra Capital Management held the most valuable stake in Opendoor Technologies Inc. (NASDAQ:OPEN), which was worth $401.5 million at the end of the third quarter. On the second spot was Altimeter Capital Management which amassed $275.1 million worth of shares. D1 Capital Partners, Suvretta Capital Management, and ARK 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 Sylebra Capital Management allocated the biggest weight to Opendoor Technologies Inc. (NASDAQ:OPEN), around 9.04% of its 13F portfolio. Stamina Capital Management is also relatively very bullish on the stock, designating 7.98 percent of its 13F equity portfolio to OPEN.
Judging by the fact that Opendoor Technologies Inc. (NASDAQ:OPEN) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of money managers that decided to sell off their positions entirely last quarter. At the top of the heap, Alec Litowitz and Ross Laser’s Magnetar Capital said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $29.9 million in stock, and Doug Silverman and Alexander Klabin’s Senator Investment Group was right behind this move, as the fund cut about $17.7 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Opendoor Technologies Inc. (NASDAQ:OPEN). We will take a look at Fortune Brands Home & Security Inc (NYSE:FBHS), American Homes 4 Rent (NYSE:AMH), Hasbro, Inc. (NASDAQ:HAS), Tencent Music Entertainment Group (NYSE:TME), Mohawk Industries, Inc. (NYSE:MHK), GFL Environmental Inc. (NYSE:GFL), and Equitable Holdings, Inc. (NYSE:EQH). This group of stocks’ market caps match OPEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FBHS | 23 | 344859 | -5 |
| AMH | 33 | 786048 | 2 |
| HAS | 25 | 185494 | -2 |
| TME | 24 | 256088 | -11 |
| MHK | 38 | 1263338 | -6 |
| GFL | 19 | 758568 | -4 |
| EQH | 46 | 1704423 | 1 |
| Average | 29.7 | 756974 | -3.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $757 million. That figure was $1743 million in OPEN’s case. Equitable Holdings, Inc. (NYSE:EQH) is the most popular stock in this table. On the other hand GFL Environmental Inc. (NYSE:GFL) is the least popular one with only 19 bullish hedge fund positions. Opendoor Technologies Inc. (NASDAQ:OPEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OPEN is 64.6. 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 positive signal but 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately OPEN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on OPEN were disappointed as the stock returned -22.8% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
