Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Opendoor Technologies Inc. (NASDAQ:OPEN) in this article.
Is OPEN a good stock to buy? Opendoor Technologies Inc. (NASDAQ:OPEN) was in 33 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. OPEN has experienced an increase in support from the world’s most elite money managers lately. There were 28 hedge funds in our database with OPEN positions at the end of the fourth quarter. Our calculations also showed that OPEN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
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. Now we’re going to take a peek at the new hedge fund action surrounding Opendoor Technologies Inc. (NASDAQ:OPEN).
Do Hedge Funds Think OPEN Is A Good Stock To Buy Now?
At the end of March, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in OPEN a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Opendoor Technologies Inc. (NASDAQ:OPEN) was held by Magnetar Capital, which reported holding $454.7 million worth of stock at the end of December. It was followed by ARK Investment Management with a $246.7 million position. Other investors bullish on the company included Suvretta Capital Management, Candlestick Capital Management, and Marcho Partners. In terms of the portfolio weights assigned to each position Magnetar Capital allocated the biggest weight to Opendoor Technologies Inc. (NASDAQ:OPEN), around 4.37% of its 13F portfolio. Marcho Partners is also relatively very bullish on the stock, setting aside 2.93 percent of its 13F equity portfolio to OPEN.
Now, specific money managers have been driving this bullishness. Sylebra Capital Management, managed by Daniel Patrick Gibson, assembled the biggest position in Opendoor Technologies Inc. (NASDAQ:OPEN). Sylebra Capital Management had $29.2 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also initiated a $14.8 million position during the quarter. The following funds were also among the new OPEN investors: Parvinder Thiara’s Athanor Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Ken Griffin’s Citadel Investment Group.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Opendoor Technologies Inc. (NASDAQ:OPEN) but similarly valued. We will take a look at Quanta Services Inc (NYSE:PWR), RH (NYSE:RH), Cna Financial Corporation (NYSE:CNA), Signature Bank (NASDAQ:SBNY), Graco Inc. (NYSE:GGG), Atmos Energy Corporation (NYSE:ATO), and Chegg Inc (NYSE:CHGG). This group of stocks’ market values are similar to OPEN’s market value.
|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 30.7 hedge funds with bullish positions and the average amount invested in these stocks was $866 million. That figure was $1047 million in OPEN’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Atmos Energy Corporation (NYSE:ATO) is the least popular one with only 15 bullish hedge fund positions. Opendoor Technologies Inc. (NASDAQ:OPEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OPEN is 65.7. 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately OPEN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on OPEN were disappointed as the stock returned -20.5% since the end of March (through 7/2) 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.