While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding LendingTree, Inc (NASDAQ:TREE).
Is TREE a good stock to buy? LendingTree, Inc (NASDAQ:TREE) has seen an increase in enthusiasm from smart money of late. LendingTree, Inc (NASDAQ:TREE) was in 20 hedge funds’ portfolios at the end of September. The all time high for this statistic is 29. Our calculations also showed that TREE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Paul Reeder of PAR Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind let’s take a glance at the recent hedge fund action encompassing LendingTree, Inc (NASDAQ:TREE).
Do Hedge Funds Think TREE Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in TREE over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Two Sigma Advisors held the most valuable stake in LendingTree, Inc (NASDAQ:TREE), which was worth $12.6 million at the end of the third quarter. On the second spot was Scopus Asset Management which amassed $12.3 million worth of shares. G2 Investment Partners Management, D E Shaw, and PAR Capital Management 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 G2 Investment Partners Management allocated the biggest weight to LendingTree, Inc (NASDAQ:TREE), around 2.79% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.41 percent of its 13F equity portfolio to TREE.
As industrywide interest jumped, some big names were leading the bulls’ herd. Scopus Asset Management, managed by Alexander Mitchell, created the most valuable position in LendingTree, Inc (NASDAQ:TREE). Scopus Asset Management had $12.3 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $1.2 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Donald Sussman’s Paloma Partners, and Michael Gelband’s ExodusPoint Capital.
Let’s also examine hedge fund activity in other stocks similar to LendingTree, Inc (NASDAQ:TREE). We will take a look at Cullen/Frost Bankers, Inc. (NYSE:CFR), Cyberark Software Ltd (NASDAQ:CYBR), Premier Inc (NASDAQ:PINC), Xerox Holdings Corporation (NYSE:XRX), Cameco Corporation (NYSE:CCJ), Janus Henderson Group plc (NYSE:JHG), and TriNet Group Inc (NYSE:TNET). This group of stocks’ market caps are closest to TREE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CFR | 19 | 39453 | 6 |
| CYBR | 25 | 234808 | 8 |
| PINC | 10 | 160511 | -5 |
| XRX | 28 | 828565 | -7 |
| CCJ | 20 | 276218 | -2 |
| JHG | 21 | 549840 | -9 |
| TNET | 26 | 335733 | 5 |
| Average | 21.3 | 346447 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $346 million. That figure was $69 million in TREE’s case. Xerox Holdings Corporation (NYSE:XRX) is the most popular stock in this table. On the other hand Premier Inc (NASDAQ:PINC) is the least popular one with only 10 bullish hedge fund positions. LendingTree, Inc (NASDAQ:TREE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TREE is 58.5. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately TREE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TREE investors were disappointed as the stock returned -13.6% since the end of September (through 12/14) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
