Hedge Funds Have Never Been This Bullish On Twilio Inc. (TWLO)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is Twilio Inc. (NYSE:TWLO) a buy, sell, or hold? Investors who are in the know are taking an optimistic view. The number of long hedge fund bets inched up by 4 in recent months. Our calculations also showed that TWLO isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Eashwar Krishnan - Tybourne Capital

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the recent hedge fund action surrounding Twilio Inc. (NYSE:TWLO).

How are hedge funds trading Twilio Inc. (NYSE:TWLO)?

At Q2’s end, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in TWLO over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


The largest stake in Twilio Inc. (NYSE:TWLO) was held by Foxhaven Asset Management, which reported holding $328.6 million worth of stock at the end of March. It was followed by Tybourne Capital Management with a $272.5 million position. Other investors bullish on the company included Whale Rock Capital Management, SCGE Management, and Coatue Management.

As industrywide interest jumped, some big names have jumped into Twilio Inc. (NYSE:TWLO) headfirst. D1 Capital Partners, managed by Daniel Sundheim, established the most valuable position in Twilio Inc. (NYSE:TWLO). D1 Capital Partners had $130.6 million invested in the company at the end of the quarter. Michael Pausic’s Foxhaven Asset Management also initiated a $65.4 million position during the quarter. The following funds were also among the new TWLO investors: Amish Mehta’s SQN Investors, David Gallo’s Valinor Management LLC, and Dan Loeb’s Third Point.

Let’s also examine hedge fund activity in other stocks similar to Twilio Inc. (NYSE:TWLO). These stocks are Laboratory Corp. of America Holdings (NYSE:LH), ANSYS, Inc. (NASDAQ:ANSS), Cincinnati Financial Corporation (NASDAQ:CINF), and Diamondback Energy Inc (NASDAQ:FANG). This group of stocks’ market caps resemble TWLO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LH 38 1528665 -1
ANSS 25 789741 -3
CINF 18 567138 -3
FANG 47 1531990 0
Average 32 1104384 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $1104 million. That figure was $2265 million in TWLO’s case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand Cincinnati Financial Corporation (NASDAQ:CINF) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Twilio Inc. (NYSE:TWLO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TWLO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TWLO were disappointed as the stock returned -19.4% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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