After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Q2 Holdings Inc (NYSE:QTWO).
Q2 Holdings Inc (NYSE:QTWO) has experienced an increase in support from the world’s most elite money managers in recent months. Q2 Holdings Inc (NYSE:QTWO) was in 26 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 27. There were 23 hedge funds in our database with QTWO holdings at the end of December. Our calculations also showed that QTWO isn’t among the 30 most popular stocks among hedge funds (click for Q1 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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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 let’s go over the recent hedge fund action regarding Q2 Holdings Inc (NYSE:QTWO).
Do Hedge Funds Think QTWO Is A Good Stock To Buy Now?
At the end of March, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards QTWO over the last 23 quarters. 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, Adams Street Partners held the most valuable stake in Q2 Holdings Inc (NYSE:QTWO), which was worth $77.9 million at the end of the fourth quarter. On the second spot was Tremblant Capital which amassed $47.4 million worth of shares. Cota Capital, Renaissance Technologies, and Millennium 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 Adams Street Partners allocated the biggest weight to Q2 Holdings Inc (NYSE:QTWO), around 12.48% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, earmarking 5.24 percent of its 13F equity portfolio to QTWO.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Renaissance Technologies, created the most outsized position in Q2 Holdings Inc (NYSE:QTWO). Renaissance Technologies had $20.7 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $12.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Q2 Holdings Inc (NYSE:QTWO) but similarly valued. These stocks are Alliance Data Systems Corporation (NYSE:ADS), Alteryx, Inc. (NYSE:AYX), Iridium Communications Inc. (NASDAQ:IRDM), Tenet Healthcare Corp (NYSE:THC), Evercore Inc. (NYSE:EVR), Nextera Energy Partners LP (NYSE:NEP), and Tandem Diabetes Care Inc (NASDAQ:TNDM). This group of stocks’ market values are similar to QTWO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADS | 36 | 1420743 | 4 |
| AYX | 35 | 749927 | -7 |
| IRDM | 22 | 605499 | 4 |
| THC | 39 | 1515145 | 5 |
| EVR | 31 | 365300 | 3 |
| NEP | 17 | 175587 | -15 |
| TNDM | 25 | 204890 | -1 |
| Average | 29.3 | 719584 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $720 million. That figure was $248 million in QTWO’s case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand Nextera Energy Partners LP (NYSE:NEP) is the least popular one with only 17 bullish hedge fund positions. Q2 Holdings Inc (NYSE:QTWO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for QTWO is 57.3. 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 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately QTWO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); QTWO investors were disappointed as the stock returned 2.8% since the end of March (through 7/9) 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 Q2 Holdings Inc. (NYSE:QTWO)
Follow Q2 Holdings Inc. (NYSE:QTWO)
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Disclosure: None. This article was originally published at Insider Monkey.
