Are Hedge Funds Betting On A Google Inc (GOOGL)/Twitter Inc (TWTR) Merger?

Twitter Inc (NYSE:TWTR) has lost 1.17% in its share price year-to-date, despite being one of the top performing large-cap stocks in the first quarter, but hedge funds tracked by Insider Monkey are bullish on the stock. The number of hedge fund investors in the micro-blogging site has increased to 64 from 42 during the first quarter, with these hedge fund managers holding $1.75 billion in stock at the end of the first quarter, up from $1.01 billion at the start of it. John Thaler’s JAT Capital Management is the largest stockholder of Twitter in our database, with a $363.70 million position consisting of 7.26 million shares of the company.

At this moment, it is difficult to predict the shape these proceedings will take in the future, but Google Inc (NASDAQ:FB) needs to take firm steps to counter the growing influence of Facebook Inc in the online advertising market and a purchase of Twitter could be just the thing to help accomplish that.

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 135% and beating the market by more than 80 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.

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