Why Traders Are Paying Attention to Twitter Inc (TWTR) Today?

Twitter Inc (NYSE:TWTR) shares are trending today after the company announced that it won’t count against the 140 character limit usernames, photos, or video attachments for replies. Moreover, new tweets beginning with a username will be seen by the public rather than just the person the tweet is addressed to. Twitter Inc (NYSE:TWTR) management is under heavy pressure to reignite growth and to successfully monetize its massive user base. Shares of the stock are near all time lows and have retreated almost 40% year-to-date while shares of Facebook Inc (NASDAQ:FB) are near all time highs and have rallied 12% year-to-date. Hopefully the new rule changes can help the company reignite growth and help Twitter regain some popularity among smart money investors.

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 750 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Twitter Inc (NYSE:TWTR), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Twitter Inc (NYSE:TWTR) investors should be aware of a decrease in enthusiasm from smart money of late. At the end of this article we will also compare TWTR to other stocks including Coca-Cola Enterprises Inc (NYSE:CCE), Principal Financial Group Inc (NYSE:PFG), and Mattel, Inc. (NASDAQ:MAT) to get a better sense of its popularity.

Today there are several formulas market participants can use to analyze their holdings. A duo of the most innovative formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top fund managers can outperform the market by a significant margin (see the details here).

Now, let’s take a peek at the recent action surrounding Twitter Inc (NYSE:TWTR).

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the fourth quarter of 2015. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Rob Citrone’s Discovery Capital Management has the number one position in Twitter Inc (NYSE:TWTR), worth close to $108.5 million, comprising 1.6% of its total 13F portfolio. Coming in second is David E. Shaw’s D E Shaw holding a $99.3 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish consist of Rob Citrone’s Discovery Capital Management, and Dmitry Balyasny’s Balyasny Asset Management.

On the next page, we are going to take a closer look at some of the funds that unloaded their entire stakes in Twitter heading into the second quarter.

Because Twitter Inc (NYSE:TWTR) has faced a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of fund managers that slashed their entire stakes last quarter. At the top of the heap, Sanford J. Colen’s Apex Capital said goodbye to the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at about $19.5 million in stock. Philippe Jabre’s fund, Jabre Capital Partners, also dumped its stock, about $11.9 million worth. These moves are important to note, as total hedge fund interest dropped by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Twitter Inc (NYSE:TWTR) but similarly valued. We will take a look at Coca-Cola Enterprises Inc (NYSE:CCE), Principal Financial Group Inc (NYSE:PFG), Mattel, Inc. (NASDAQ:MAT), and Empresa Nacional de Electricidad (ADR) (NYSE:EOC). All of these stocks’ market caps are closest to TWTR’s market cap.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $473 million. That figure was $403 million in TWTR’s case. Mattel, Inc. (NASDAQ:MAT) is the most popular stock in this table. On the other hand Empresa Nacional de Electricidad (ADR) (NYSE:EOC) is the least popular one with only 13 bullish hedge fund positions. Twitter Inc (NYSE:TWTR) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MAT might be a better candidate to consider a long position.

Disclosure: None