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Hedge Funds Dipping Their Toes Back Into Tradeweb Markets (TW)

The latest 13F reporting period has come and gone, and 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. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Tradeweb Markets Inc. (NASDAQ:TW) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Tradeweb Markets Inc. (NASDAQ:TW) investors should be aware of an increase in enthusiasm from smart money lately. Tradeweb Markets Inc. (NASDAQ:TW) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 38. Our calculations also showed that TW 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).

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

In the eyes of most investors, hedge funds are viewed as unimportant, old investment tools of yesteryear. While there are over 8000 funds trading at present, Our researchers look at the elite of this club, around 850 funds. It is estimated that this group of investors watch over the lion’s share of all hedge funds’ total capital, and by monitoring their inimitable investments, Insider Monkey has brought to light many investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per 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 .

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. 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 review the new hedge fund action surrounding Tradeweb Markets Inc. (NASDAQ:TW).

What does smart money think about Tradeweb Markets Inc. (NASDAQ:TW)?

At second quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the first quarter of 2020. On the other hand, there were a total of 37 hedge funds with a bullish position in TW a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is TW A Good Stock To Buy?

Among these funds, Alkeon Capital Management held the most valuable stake in Tradeweb Markets Inc. (NASDAQ:TW), which was worth $90.7 million at the end of the third quarter. On the second spot was Parsifal Capital Management which amassed $41.5 million worth of shares. Two Sigma Advisors, Harbor Spring Capital, and Samlyn Capital 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 Parsifal Capital Management allocated the biggest weight to Tradeweb Markets Inc. (NASDAQ:TW), around 12.29% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, dishing out 4.09 percent of its 13F equity portfolio to TW.

As aggregate interest increased, key hedge funds were breaking ground themselves. Columbus Circle Investors, managed by Principal Global Investors, initiated the biggest position in Tradeweb Markets Inc. (NASDAQ:TW). Columbus Circle Investors had $19.5 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $4.5 million investment in the stock during the quarter. The other funds with brand new TW positions are Noam Gottesman’s GLG Partners, Qing Li’s Sciencast Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now review hedge fund activity in other stocks similar to Tradeweb Markets Inc. (NASDAQ:TW). We will take a look at Mid America Apartment Communities Inc (NYSE:MAA), Liberty Global plc (NASDAQ:LBTYA), International Flavors & Fragrances Inc (NYSE:IFF), Duke Realty Corporation (NYSE:DRE), Steris Plc (NYSE:STE), EXACT Sciences Corporation (NASDAQ:EXAS), and Pinterest, Inc. (NYSE:PINS). This group of stocks’ market valuations resemble TW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAA 30 503965 4
LBTYA 29 1048280 -1
IFF 31 234080 3
DRE 19 102859 3
STE 40 545240 5
EXAS 43 993223 9
PINS 53 1067483 15
Average 35 642161 5.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $642 million. That figure was $347 million in TW’s case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand Duke Realty Corporation (NYSE:DRE) is the least popular one with only 19 bullish hedge fund positions. Tradeweb Markets Inc. (NASDAQ:TW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TW is 54.6. 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 negative signal and 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 33% in 2020 through the end of August and surpassed the market by 23.2 percentage points. Unfortunately TW wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TW investors were disappointed as the stock returned -1.3% since Q2 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 most of these stocks already outperformed the market in 2020.

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