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Hedge Funds Are Coming Back To Farfetch Limited (FTCH)

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 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Farfetch Limited (NYSE:FTCH) and determine whether the smart money was really smart about this stock.

Is Farfetch Limited (NYSE:FTCH) the right investment to pursue these days? The smart money was turning bullish. The number of long hedge fund positions rose by 15 lately. Farfetch Limited (NYSE:FTCH) was in 37 hedge funds’ portfolios at the end of June. The all time high for this statistics is 43. Our calculations also showed that FTCH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 22 hedge funds in our database with FTCH positions at the end of the first quarter.

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. 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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s take a look at the new hedge fund action surrounding Farfetch Limited (NYSE:FTCH).

What have hedge funds been doing with Farfetch Limited (NYSE:FTCH)?

At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 68% from the first quarter of 2020. By comparison, 24 hedge funds held shares or bullish call options in FTCH a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FTCH A Good Stock To Buy?

More specifically, Tybourne Capital Management was the largest shareholder of Farfetch Limited (NYSE:FTCH), with a stake worth $250 million reported as of the end of September. Trailing Tybourne Capital Management was Miller Value Partners, which amassed a stake valued at $141.8 million. Tremblant Capital, Altimeter Capital Management, and Citadel Investment Group 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 Tybourne Capital Management allocated the biggest weight to Farfetch Limited (NYSE:FTCH), around 7.61% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, earmarking 6.3 percent of its 13F equity portfolio to FTCH.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the largest position in Farfetch Limited (NYSE:FTCH). Millennium Management had $28 million invested in the company at the end of the quarter. Brian Bares’s Bares Capital Management also made a $19.7 million investment in the stock during the quarter. The following funds were also among the new FTCH investors: Larry Chen and Terry Zhang’s Tairen Capital, Daryl Smith’s Kayak Investment Partners, and David Fiszel’s Honeycomb Asset Management.

Let’s go over hedge fund activity in other stocks similar to Farfetch Limited (NYSE:FTCH). These stocks are Donaldson Company, Inc. (NYSE:DCI), Sensata Technologies Holding plc (NYSE:ST), Santander Consumer USA Holdings Inc (NYSE:SC), Bunge Limited (NYSE:BG), Aluminum Corp. of China Limited (NYSE:ACH), Store Capital Corporation (NYSE:STOR), and Schrodinger, Inc. (NASDAQ:SDGR). This group of stocks’ market valuations are closest to FTCH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DCI 27 226099 7
ST 33 1073165 7
SC 20 561451 0
BG 37 620306 -2
ACH 6 3451 4
STOR 16 689832 -9
SDGR 15 1099632 0
Average 22 610562 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $611 million. That figure was $837 million in FTCH’s case. Bunge Limited (NYSE:BG) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 6 bullish hedge fund positions. Farfetch Limited (NYSE:FTCH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FTCH is 85.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on FTCH as the stock returned 60.3% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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