Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Q2 Holdings Inc (NYSE:QTWO).
Is Q2 Holdings Inc (NYSE:QTWO) ready to rally soon? Prominent investors are getting less optimistic. The number of bullish hedge fund bets were trimmed by 5 lately. Our calculations also showed that QTWO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are perceived as worthless, outdated financial vehicles of years past. While there are greater than 8000 funds in operation at present, Our experts choose to focus on the bigwigs of this group, about 750 funds. These investment experts handle the majority of the smart money’s total asset base, and by monitoring their unrivaled equity investments, Insider Monkey has figured out many investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Louis Bacon Moore of Moore Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the new hedge fund action surrounding Q2 Holdings Inc (NYSE:QTWO).
Hedge fund activity in Q2 Holdings Inc (NYSE:QTWO)
At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in QTWO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Tremblant Capital held the most valuable stake in Q2 Holdings Inc (NYSE:QTWO), which was worth $45.4 million at the end of the third quarter. On the second spot was Columbus Circle Investors which amassed $27.6 million worth of shares. Moore Global Investments, Citadel Investment Group, and Renaissance Technologies 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 Tremblant Capital allocated the biggest weight to Q2 Holdings Inc (NYSE:QTWO), around 2.61% of its 13F portfolio. Atika Capital is also relatively very bullish on the stock, dishing out 1.24 percent of its 13F equity portfolio to QTWO.
Since Q2 Holdings Inc (NYSE:QTWO) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies who were dropping their full holdings by the end of the third quarter. Intriguingly, Benjamin A. Smith’s Laurion Capital Management dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising close to $3.4 million in stock. Nick Niell’s fund, Arrowgrass Capital Partners, also dumped its stock, about $2.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Q2 Holdings Inc (NYSE:QTWO) but similarly valued. We will take a look at Laureate Education, Inc. (NASDAQ:LAUR), GrafTech International Ltd. (NYSE:EAF), Alcoa Corporation (NYSE:AA), and Ardagh Group S.A. (NYSE:ARD). This group of stocks’ market valuations match QTWO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LAUR | 25 | 505326 | 2 |
| EAF | 26 | 276282 | -1 |
| AA | 28 | 530144 | 2 |
| ARD | 12 | 63888 | 1 |
| Average | 22.75 | 343910 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $344 million. That figure was $154 million in QTWO’s case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 12 bullish hedge fund positions. Q2 Holdings Inc (NYSE:QTWO) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on QTWO, though not to the same extent, as the stock returned 7% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
