Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (see the details). So, how do we invest in this environment? We track hedge funds and corporate insiders for leads. Hedge funds’ top 5 stock picks returned 2.9% through March 2nd and beat the S&P 500 ETFs by nearly 7 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Amazon.com, Inc. (NASDAQ:AMZN).
Is Amazon.com, Inc. (NASDAQ:AMZN) a buy here? Investors who are in the know are becoming more confident. The number of long hedge fund bets rose by 21 recently. Our calculations also showed that AMZN ranked #1 among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). AMZN was in 202 hedge funds’ portfolios at the end of December. There were 181 hedge funds in our database with AMZN holdings at the end of the previous quarter.
Video: Click the image to 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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
We leave no stone unturned when looking for the next great investment idea. We read hedge fund investor letters, listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out recommendations of services with hard to believe track records. Last month, we recommended a long position in one of the most shorted stocks in the market. No, our recommendation wasn’t Tesla (TSLA). It was a better pick than Tesla as this stock gained nearly 50% in 3 weeks.
Now we’re going to take a look at the fresh hedge fund action regarding Amazon.com, Inc. (NASDAQ:AMZN).
What does smart money think about Amazon.com, Inc. (NASDAQ:AMZN)?
At Q4’s end, a total of 202 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AMZN over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Amazon.com, Inc. (NASDAQ:AMZN), with a stake worth $5353 million reported as of the end of September. Trailing Citadel Investment Group was Fisher Asset Management, which amassed a stake valued at $3263.9 million. Eagle Capital Management, Viking Global, 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 Ursa Fund Management allocated the biggest weight to Amazon.com, Inc. (NASDAQ:AMZN), around 36.08% of its 13F portfolio. Crake Asset Management is also relatively very bullish on the stock, dishing out 16.34 percent of its 13F equity portfolio to AMZN.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Ursa Fund Management, managed by Andrew Hahn, created the most valuable position in Amazon.com, Inc. (NASDAQ:AMZN). Ursa Fund Management had $863.5 million invested in the company at the end of the quarter. Billionaire Jim Simons’ Renaissance Technologies also made a $623.2 million investment in the stock during the quarter. The other funds with brand new AMZN positions are Rajiv Jain’s GQG Partners, Aaron Cowen’s Suvretta Capital Management, and Dan Loeb’s Third Point.
Let’s now take a look at hedge fund activity in other stocks similar to Amazon.com, Inc. (NASDAQ:AMZN). We will take a look at Facebook Inc (NASDAQ:FB), Alibaba Group Holding Limited (NYSE:BABA), JPMorgan Chase & Co. (NYSE:JPM), and Visa Inc (NYSE:V). This group of stocks’ market valuations resemble AMZN’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 152.25 hedge funds with bullish positions and the average amount invested in these stocks was $19196 million. That figure was $28001 million in AMZN’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand JPMorgan Chase & Co. (NYSE:JPM) is the least popular one with only 98 bullish hedge fund positions. Compared to these stocks Amazon.com, Inc. (NASDAQ:AMZN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Hedge funds were also right about betting on AMZN as the stock returned 5.7% so far in Q1 (through March 2nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.