Is Twilio Inc. (TWLO) Going to Burn These Hedge Funds?

Does Twilio Inc. (NYSE:TWLO) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Is Twilio Inc. (NYSE:TWLO) ready to rally soon? The smart money is becoming less hopeful. The number of long hedge fund positions decreased by 3 recently. Our calculations also showed that TWLO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). TWLO was in 60 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 63 hedge funds in our database with TWLO positions at the end of the previous quarter.
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 today’s marketplace there are numerous tools shareholders can use to analyze publicly traded companies. A duo of the most underrated tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the elite fund managers can outclass their index-focused peers by a superb margin (see the details here).

David Blood

David Blood of Generation Investment Management

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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now let’s take a peek at the key hedge fund action regarding Twilio Inc. (NYSE:TWLO).

What does smart money think about Twilio Inc. (NYSE:TWLO)?

Heading into the first quarter of 2020, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in TWLO over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TWLO A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Generation Investment Management, managed by David Blood and Al Gore, holds the largest position in Twilio Inc. (NYSE:TWLO). Generation Investment Management has a $330.6 million position in the stock, comprising 2.1% of its 13F portfolio. The second most bullish fund manager is Tybourne Capital Management, managed by Eashwar Krishnan, which holds a $323.3 million position; the fund has 12.4% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise Michael Pausic’s Foxhaven Asset Management, Christopher Lyle’s SCGE Management and Chase Coleman’s Tiger Global Management LLC. In terms of the portfolio weights assigned to each position Tybourne Capital Management allocated the biggest weight to Twilio Inc. (NYSE:TWLO), around 12.39% of its 13F portfolio. Foxhaven Asset Management is also relatively very bullish on the stock, setting aside 12.3 percent of its 13F equity portfolio to TWLO.

Seeing as Twilio Inc. (NYSE:TWLO) has witnessed a decline in interest from the smart money, it’s safe to say that there exists a select few fund managers that slashed their entire stakes in the third quarter. Interestingly, Daniel Sundheim’s D1 Capital Partners dropped the largest investment of all the hedgies watched by Insider Monkey, comprising close to $99.8 million in stock, and Philippe Laffont’s Coatue Management was right behind this move, as the fund dropped about $86.2 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Twilio Inc. (NYSE:TWLO). We will take a look at Annaly Capital Management, Inc. (NYSE:NLY), HEICO Corporation (NYSE:HEI), CBOE Holdings, Inc (NASDAQ:CBOE), and Plains All American Pipeline, L.P. (NYSE:PAA). All of these stocks’ market caps are closest to TWLO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NLY 21 219868 5
HEI 57 1205133 11
CBOE 27 1050257 1
PAA 12 168993 -5
Average 29.25 661063 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $661 million. That figure was $2101 million in TWLO’s case. HEICO Corporation (NYSE:HEI) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 12 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but still managed to beat the market by 1.9 percentage points. Hedge funds were also right about betting on TWLO as the stock returned -5.3% so far in Q1 (through March 9th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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