Hedge Funds Are Selling LendingTree, Inc (TREE)

The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards LendingTree, Inc (NASDAQ:TREE).

LendingTree, Inc (NASDAQ:TREE) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. LendingTree, Inc (NASDAQ:TREE) was in 25 hedge funds’ portfolios at the end of March. The all time high for this statistic is 29. Our calculations also showed that TREE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a gander at the recent hedge fund action regarding LendingTree, Inc (NASDAQ:TREE).

Do Hedge Funds Think TREE Is A Good Stock To Buy Now?

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in TREE a year ago. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, ARK Investment Management, managed by Catherine D. Wood, holds the largest position in LendingTree, Inc (NASDAQ:TREE). ARK Investment Management has a $367 million position in the stock, comprising 0.7% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $51.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors and Stephen Perkins’s Toronado Partners. In terms of the portfolio weights assigned to each position Toronado Partners allocated the biggest weight to LendingTree, Inc (NASDAQ:TREE), around 7.79% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, setting aside 2.9 percent of its 13F equity portfolio to TREE.

Because LendingTree, Inc (NASDAQ:TREE) has witnessed falling interest from hedge fund managers, logic holds that there lies a certain “tier” of hedge funds who sold off their positions entirely heading into Q2. Interestingly, Gavin Baker’s Atreides Management sold off the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $68.1 million in stock. Frank Fu’s fund, CaaS Capital, also dumped its stock, about $15.8 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q2.

Let’s go over hedge fund activity in other stocks similar to LendingTree, Inc (NASDAQ:TREE). We will take a look at Arconic Corporation (NYSE:ARNC), Corcept Therapeutics Incorporated (NASDAQ:CORT), Fulgent Genetics, Inc. (NASDAQ:FLGT), Nelnet, Inc. (NYSE:NNI), American States Water Co (NYSE:AWR), Kontoor Brands, Inc. (NYSE:KTB), and Macquarie Infrastructure Corporation (NYSE:MIC). All of these stocks’ market caps are closest to TREE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $568 million in TREE’s case. Macquarie Infrastructure Corporation (NYSE:MIC) is the most popular stock in this table. On the other hand Nelnet, Inc. (NYSE:NNI) is the least popular one with only 11 bullish hedge fund positions. LendingTree, Inc (NASDAQ:TREE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TREE is 61.7. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately TREE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TREE were disappointed as the stock returned -3.8% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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