In this article we are going to use hedge fund sentiment as a tool and determine whether Electronic Arts Inc. (NASDAQ:EA) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Electronic Arts Inc. (NASDAQ:EA) has experienced an increase in activity from the world’s largest hedge funds of late. Electronic Arts Inc. (NASDAQ:EA) was in 56 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 79. There were 44 hedge funds in our database with EA holdings at the end of March. Our calculations also showed that EA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
To the average investor there are plenty of formulas stock market investors put to use to evaluate their holdings. A pair of the most useful formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the broader indices by a superb margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a glance at the new hedge fund action surrounding Electronic Arts Inc. (NASDAQ:EA).
Do Hedge Funds Think EA Is A Good Stock To Buy Now?
At the end of June, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EA over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Electronic Arts Inc. (NASDAQ:EA) was held by Citadel Investment Group, which reported holding $243.1 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $221.8 million position. Other investors bullish on the company included Two Sigma Advisors, Scopus Asset Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position Force Hill Capital Management allocated the biggest weight to Electronic Arts Inc. (NASDAQ:EA), around 3.51% of its 13F portfolio. Adam Capital is also relatively very bullish on the stock, designating 2.89 percent of its 13F equity portfolio to EA.
As one would reasonably expect, specific money managers were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, initiated the most outsized position in Electronic Arts Inc. (NASDAQ:EA). Scopus Asset Management had $172.6 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $82.3 million position during the quarter. The following funds were also among the new EA investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Alexander Mitchell’s Scopus Asset Management, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Electronic Arts Inc. (NASDAQ:EA) but similarly valued. These stocks are American International Group Inc (NYSE:AIG), Barclays PLC (NYSE:BCS), Microchip Technology Incorporated (NASDAQ:MCHP), Amphenol Corporation (NYSE:APH), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Baxter International Inc. (NYSE:BAX), and Prudential Financial Inc (NYSE:PRU). This group of stocks’ market values match EA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AIG | 39 | 2744991 | 6 |
| BCS | 11 | 119955 | 1 |
| MCHP | 50 | 1121112 | 8 |
| APH | 39 | 1203614 | -3 |
| ALXN | 69 | 10090913 | -8 |
| BAX | 46 | 2911204 | 6 |
| PRU | 28 | 494481 | -9 |
| Average | 40.3 | 2669467 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.3 hedge funds with bullish positions and the average amount invested in these stocks was $2669 million. That figure was $2023 million in EA’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 11 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 70.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately EA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EA were disappointed as the stock returned -8.1% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
