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Hedge Fund Darlings vs. Match Group, Inc. (MTCH) In 2019

Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 31% through December 23rd. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Match Group, Inc. (NASDAQ:MTCH).

Match Group, Inc. (NASDAQ:MTCH) was in 41 hedge funds’ portfolios at the end of the third quarter of 2019. MTCH has experienced an increase in activity from the world’s largest hedge funds lately. There were 31 hedge funds in our database with MTCH holdings at the end of the previous quarter. Our calculations also showed that MTCH isn’t 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).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Glen Kacher of Light Street Capital

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 check out the fresh hedge fund action regarding Match Group, Inc. (NASDAQ:MTCH).

What does smart money think about Match Group, Inc. (NASDAQ:MTCH)?

Heading into the fourth quarter of 2019, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MTCH over the last 17 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Match Group, Inc. (NASDAQ:MTCH), which was worth $143.1 million at the end of the third quarter. On the second spot was Whale Rock Capital Management which amassed $130.5 million worth of shares. Aristeia Capital, D E Shaw, and Light Street Capital 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 Aristeia Capital allocated the biggest weight to Match Group, Inc. (NASDAQ:MTCH), around 7.43% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, setting aside 5.29 percent of its 13F equity portfolio to MTCH.

Now, key hedge funds were leading the bulls’ herd. Whale Rock Capital Management, managed by Alex Sacerdote, created the biggest position in Match Group, Inc. (NASDAQ:MTCH). Whale Rock Capital Management had $130.5 million invested in the company at the end of the quarter. Robert Henry Lynch’s Aristeia Capital also initiated a $127.8 million position during the quarter. The following funds were also among the new MTCH investors: Alexander Mitchell’s Scopus Asset Management, Christian Leone’s Luxor Capital Group, and Ryan Caldwell’s Chiron Investment Management.

Let’s check out hedge fund activity in other stocks similar to Match Group, Inc. (NASDAQ:MTCH). These stocks are Northern Trust Corporation (NASDAQ:NTRS), Boston Properties, Inc. (NYSE:BXP), Vulcan Materials Company (NYSE:VMC), and Hewlett Packard Enterprise Company (NYSE:HPE). All of these stocks’ market caps are similar to MTCH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NTRS 21 316167 -8
BXP 24 447838 1
VMC 53 1965254 1
HPE 27 822361 -1
Average 31.25 887905 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $888 million. That figure was $1107 million in MTCH’s case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand Northern Trust Corporation (NASDAQ:NTRS) is the least popular one with only 21 bullish hedge fund positions. Match Group, Inc. (NASDAQ:MTCH) is not the most popular stock in this group but hedge fund interest is still 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. Hedge funds were also right about betting on MTCH as the stock returned 87.5% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.

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