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Did Hedge Funds Make The Right Call On The Trade Desk, Inc. (TTD) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards The Trade Desk, Inc. (NASDAQ:TTD) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is The Trade Desk, Inc. (NASDAQ:TTD) the right pick for your portfolio? Money managers were betting on the stock. The number of bullish hedge fund bets inched up by 1 recently. Our calculations also showed that TTD 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). TTD was in 25 hedge funds’ portfolios at the end of March. There were 24 hedge funds in our database with TTD holdings at the end of the previous quarter.

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

In the eyes of most investors, hedge funds are viewed as underperforming, outdated financial tools of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the upper echelon of this club, about 850 funds. Most estimates calculate that this group of people control the majority of the smart money’s total asset base, and by tailing their highest performing investments, Insider Monkey has discovered many investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

TUDOR INVESTMENT CORP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. 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 if you have any good ideas send us an email. Now we’re going to analyze the fresh hedge fund action surrounding The Trade Desk, Inc. (NASDAQ:TTD).

How are hedge funds trading The Trade Desk, Inc. (NASDAQ:TTD)?

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TTD over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is TTD A Good Stock To Buy?

The largest stake in The Trade Desk, Inc. (NASDAQ:TTD) was held by Alkeon Capital Management, which reported holding $193 million worth of stock at the end of September. It was followed by D E Shaw with a $164.2 million position. Other investors bullish on the company included Zevenbergen Capital Investments, Citadel Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Ogborne Capital allocated the biggest weight to The Trade Desk, Inc. (NASDAQ:TTD), around 5.51% of its 13F portfolio. Zevenbergen Capital Investments is also relatively very bullish on the stock, earmarking 4.13 percent of its 13F equity portfolio to TTD.

As industrywide interest jumped, specific money managers have jumped into The Trade Desk, Inc. (NASDAQ:TTD) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the most valuable position in The Trade Desk, Inc. (NASDAQ:TTD). Two Sigma Advisors had $17.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $9.4 million position during the quarter. The other funds with brand new TTD positions are Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, Principal Global Investors’s Columbus Circle Investors, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now take a look at hedge fund activity in other stocks similar to The Trade Desk, Inc. (NASDAQ:TTD). We will take a look at Celanese Corporation (NYSE:CE), Black Knight, Inc. (NYSE:BKI), Cypress Semiconductor Corporation (NASDAQ:CY), and C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW). All of these stocks’ market caps are similar to TTD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CE 29 509076 -2
BKI 32 372352 1
CY 46 2083415 10
CHRW 32 247903 8
Average 34.75 803187 4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.75 hedge funds with bullish positions and the average amount invested in these stocks was $803 million. That figure was $394 million in TTD’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand Celanese Corporation (NYSE:CE) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks The Trade Desk, Inc. (NASDAQ:TTD) is even less popular than CE. Hedge funds clearly dropped the ball on TTD as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on TTD as the stock returned 110.6% in the second quarter and outperformed the market by an even larger margin.

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