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Did Hedge Funds Make The Right Call On Fitbit Inc (FIT)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Fitbit Inc (NYSE:FIT) and determine whether the smart money was really smart about this stock.

Fitbit Inc (NYSE:FIT) has experienced an increase in enthusiasm from smart money of late. Our calculations also showed that FIT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Halbower Pentwater Capital

Matthew Halbower of Pentwater Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now we’re going to take a look at the latest hedge fund action surrounding Fitbit Inc (NYSE:FIT).

What have hedge funds been doing with Fitbit Inc (NYSE:FIT)?

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FIT over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, Magnetar Capital held the most valuable stake in Fitbit Inc (NYSE:FIT), which was worth $76.5 million at the end of the third quarter. On the second spot was Pentwater Capital Management which amassed $48.1 million worth of shares. Renaissance Technologies, Alpine Associates, and Coatue 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 Litespeed Management allocated the biggest weight to Fitbit Inc (NYSE:FIT), around 6.17% of its 13F portfolio. HighVista Strategies is also relatively very bullish on the stock, dishing out 2.78 percent of its 13F equity portfolio to FIT.

As aggregate interest increased, key money managers have jumped into Fitbit Inc (NYSE:FIT) headfirst. Coatue Management, managed by Philippe Laffont, established the largest position in Fitbit Inc (NYSE:FIT). Coatue Management had $21.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $11.3 million position during the quarter. The other funds with new positions in the stock are David Harding’s Winton Capital Management, Carl Tiedemann and Michael Tiedemann’s TIG Advisors, and Steven Clark’s Omni Partners.

Let’s also examine hedge fund activity in other stocks similar to Fitbit Inc (NYSE:FIT). We will take a look at Rogers Corporation (NYSE:ROG), Vonage Holdings Corp. (NASDAQ:VG), BankUnited Inc (NYSE:BKU), and PolyOne Corporation (NYSE:POL). All of these stocks’ market caps are closest to FIT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ROG 19 77338 -2
VG 25 206818 -10
BKU 18 172092 -7
POL 28 165324 4
Average 22.5 155393 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $273 million in FIT’s case. PolyOne Corporation (NYSE:POL) is the most popular stock in this table. On the other hand BankUnited Inc (NYSE:BKU) is the least popular one with only 18 bullish hedge fund positions. Fitbit Inc (NYSE:FIT) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately FIT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FIT were disappointed as the stock returned -3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.