Hedge Fund Consensus Stocks vs. Amazon.com, Inc. (AMZN) In 2019

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.1% in 2019 (through December 23rd) and outperformed the broader market benchmark by 10.1 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Amazon.com, Inc. (NASDAQ:AMZN) a good investment today? Investors who are in the know are buying. The number of long hedge fund bets advanced by 5 lately. Our calculations also showed that AMZN currently ranks third among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). AMZN was in 168 hedge funds’ portfolios at the end of September. There were 163 hedge funds in our database with AMZN positions at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s review the fresh hedge fund action regarding Amazon.com, Inc. (NASDAQ:AMZN).

Hedge fund activity in Amazon.com, Inc. (NASDAQ:AMZN)

Heading into the fourth quarter of 2019, a total of 168 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. On the other hand, there were a total of 150 hedge funds with a bullish position in AMZN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management has the number one position in Amazon.com, Inc. (NASDAQ:AMZN), worth close to $3.0587 billion, amounting to 3.4% of its total 13F portfolio. Coming in second is Boykin Curry of Eagle Capital Management, with a $1.5867 billion position; 5.6% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include Andreas Halvorsen’s Viking Global, Chase Coleman’s Tiger Global Management and  Lone Pine Capital. In terms of the portfolio weights assigned to each position Skye Global Management allocated the biggest weight to Amazon.com, Inc. (NASDAQ:AMZN), around 29.61% of its 13F portfolio. North Fourth Asset Management is also relatively very bullish on the stock, dishing out 18.07 percent of its 13F equity portfolio to AMZN.

Consequently, specific money managers were breaking ground themselves. Egerton Capital Limited, managed by John Armitage, assembled the biggest position in Amazon.com, Inc. (NASDAQ:AMZN). Egerton Capital Limited had $264.5 million invested in the company at the end of the quarter. Robert Pitts’s Steadfast Capital Management also made a $229 million investment in the stock during the quarter. The other funds with brand new AMZN positions are Benjamin A. Smith’s Laurion Capital Management, Alexander Mitchell’s Scopus Asset Management, and Gregg Moskowitz’s Interval Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Amazon.com, Inc. (NASDAQ:AMZN) but similarly valued. We will take a look at Alphabet Inc (NASDAQ:GOOGL), Alphabet Inc (NASDAQ:GOOG), Berkshire Hathaway Inc. (NYSE:BRK-B), and Facebook Inc (NASDAQ:FB). This group of stocks’ market values are closest to AMZN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GOOGL 147 12321541 18
GOOG 136 15584517 10
BRK-B 99 22272006 6
FB 179 20837470 -3
Average 140.25 17753884 7.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 140.25 hedge funds with bullish positions and the average amount invested in these stocks was $17754 million. That figure was $22965 million in AMZN’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand Berkshire Hathaway Inc. (NYSE:BRK-B) is the least popular one with only 99 bullish hedge fund positions. Amazon.com, Inc. (NASDAQ:AMZN) is not the most popular stock in this group but hedge fund interest is still way above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately AMZN wasn’t nearly as successful as these 20 stocks and hedge funds that were betting on AMZN were disappointed as the stock returned 19.4% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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