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Hedge Funds Cashing Out Of Electronic Arts Inc. (EA)

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 Electronic Arts Inc. (NASDAQ:EA) and determine whether the smart money was really smart about this stock.

Is Electronic Arts Inc. (NASDAQ:EA) a healthy stock for your portfolio? Investors who are in the know were turning less bullish. The number of bullish hedge fund positions dropped by 6 lately. Electronic Arts Inc. (NASDAQ:EA) was in 67 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 79. Our calculations also showed that EA 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). Electronic Arts Inc. (NASDAQ:EA) was in 67 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 79. There were 73 hedge funds in our database with EA positions at the end of the previous quarter.

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

In the eyes of most market participants, hedge funds are perceived as slow, old financial tools of years past. While there are greater than 8000 funds trading at present, Our researchers hone in on the bigwigs of this group, approximately 850 funds. These investment experts command most of all hedge funds’ total asset base, and by monitoring their first-class picks, Insider Monkey has uncovered several investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Gil Simon of SoMa Equity Partners

Gil Simon of SoMa Equity Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a peek at the latest hedge fund action encompassing Electronic Arts Inc. (NASDAQ:EA).

How have hedgies been trading Electronic Arts Inc. (NASDAQ:EA)?

Heading into the third quarter of 2020, a total of 67 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EA over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Electronic Arts Inc. (NASDAQ:EA) was held by Renaissance Technologies, which reported holding $409 million worth of stock at the end of September. It was followed by AQR Capital Management with a $296 million position. Other investors bullish on the company included SoMa Equity Partners, Arrowstreet Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position SoMa Equity Partners allocated the biggest weight to Electronic Arts Inc. (NASDAQ:EA), around 7.21% of its 13F portfolio. Crescent Park Management is also relatively very bullish on the stock, dishing out 5.46 percent of its 13F equity portfolio to EA.

Since Electronic Arts Inc. (NASDAQ:EA) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies who were dropping their positions entirely by the end of the second quarter. It’s worth mentioning that Karthik Sarma’s SRS Investment Management sold off the largest stake of all the hedgies watched by Insider Monkey, worth about $160 million in stock, and Barry Dargan’s Intermede Investment Partners was right behind this move, as the fund said goodbye to about $60 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 6 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks similar to Electronic Arts Inc. (NASDAQ:EA). We will take a look at BCE Inc. (NYSE:BCE), General Mills, Inc. (NYSE:GIS), Walgreens Boots Alliance Inc (NASDAQ:WBA), Emerson Electric Co. (NYSE:EMR), eBay Inc (NASDAQ:EBAY), Centene Corporation (NYSE:CNC), and FedEx Corporation (NYSE:FDX). All of these stocks’ market caps resemble EA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BCE 10 176362 -3
GIS 37 912759 -2
WBA 45 490238 0
EMR 36 421821 3
EBAY 58 5017459 6
CNC 71 3079774 5
FDX 46 1254577 -4
Average 43.3 1621856 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.3 hedge funds with bullish positions and the average amount invested in these stocks was $1622 million. That figure was $1989 million in EA’s case. Centene Corporation (NYSE:CNC) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 10 bullish hedge fund positions. Electronic Arts Inc. (NASDAQ:EA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EA is 71.2. 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 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 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately EA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on EA were disappointed as the stock returned 7.8% 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.