Hedge Funds Are Betting On Fitbit Inc (FIT)

In this article you are going to find out whether hedge funds think Fitbit Inc (NYSE:FIT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Fitbit Inc (NYSE:FIT) a healthy stock for your portfolio? Money managers are becoming more confident. The number of bullish hedge fund positions rose by 2 in recent months. 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the fresh hedge fund action encompassing Fitbit Inc (NYSE:FIT).

How are hedge funds trading Fitbit Inc (NYSE:FIT)?

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in FIT over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Fitbit Inc (NYSE:FIT) was held by Magnetar Capital, which reported holding $76.5 million worth of stock at the end of September. It was followed by Pentwater Capital Management with a $48.1 million position. Other investors bullish on the company included Renaissance Technologies, Alpine Associates, and Coatue Management. 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, setting aside 2.78 percent of its 13F equity portfolio to FIT.

As aggregate interest increased, key hedge funds were breaking ground themselves. Coatue Management, managed by Philippe Laffont, initiated the most valuable 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 now review 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). This group of stocks’ market caps match 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 8.3% in 2020 through the end of May but beat the market by 13.2 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 -4.8% 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.