It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Paypal Holdings Inc (NASDAQ:PYPL) during the quarter below.
Is Paypal Holdings Inc (NASDAQ:PYPL) a buy here? The smart money is optimistic. Since the company was spun off from eBay in the third quarter, a total of 87 reported long positions in the company. At the end of this article we will also compare PYPL to other stocks, including Charles Schwab Corp (NYSE:SCHW), Liberty Global Inc. (NASDAQ:LBTYA), and The Blackstone Group L.P. (NYSE:BX) to get a better sense of its popularity.
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To the average investor there are numerous indicators stock market investors use to assess stocks. A couple of the best indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can outperform the broader indices by a healthy amount (see the details here).
Keeping this in mind, let’s view the recent action surrounding Paypal Holdings Inc (NASDAQ:PYPL).
What have hedge funds been doing with Paypal Holdings Inc (NASDAQ:PYPL)?
When looking at the institutional investors followed by Insider Monkey, Carl Icahn’s Icahn Capital LP has the most valuable position in Paypal Holdings Inc (NASDAQ:PYPL), worth close to $1.4363 billion, comprising 5.2% of its total 13F portfolio. The second most bullish fund manager is Orbis Investment Management, led by William B. Gray, holding a $453.3 million position; 3.9% of its 13F portfolio is allocated to the company. The remaining members of the smart money that are bullish include D. E. Shaw’s D E Shaw, Seth Klarman’s Baupost Group and Kerr Neilson’s Platinum Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Paypal Holdings Inc (NASDAQ:PYPL) but similarly valued. These stocks are Charles Schwab Corp (NYSE:SCHW), Liberty Global Inc. (NASDAQ:LBTYA), The Blackstone Group L.P. (NYSE:BX), and Automatic Data Processing (NASDAQ:ADP). This group of stocks’ market caps match PYPL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SCHW | 48 | 3101940 | 2 |
| LBTYA | 64 | 2185240 | -6 |
| BX | 34 | 406116 | 0 |
| ADP | 32 | 957220 | -10 |
As you can see these stocks had an average of 45 hedge funds with bullish positions and the average amount invested in these stocks was $1.66 billion, significantly lower than the $4.94 billion figure in PYPL’s case. Liberty Global Inc. (NASDAQ:LBTYA) is the most popular stock in this table, with a total of 64 funds reporting long positions. On the other hand Automatic Data Processing (NASDAQ:ADP) is the least popular one. Compared to these stocks Paypal Holdings Inc (NASDAQ:PYPL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
