Is Twilio (TWLO) Stock A Buy or Sell?

In this article we are going to use hedge fund sentiment as a tool and determine whether Twilio Inc. (NYSE:TWLO) 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.

Is Twilio (TWLO) stock a buy or sell? Prominent investors were in a bullish mood. The number of bullish hedge fund positions increased by 23 lately. Twilio Inc. (NYSE:TWLO) was in 94 hedge funds’ portfolios at the end of December. The all time high for this statistic was previously 71. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TWLO ranked 29th among the 30 most popular stocks among hedge funds (click for Q4 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 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.


Louis Bacon Moore of Moore Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article). Keeping this in mind we’re going to take a gander at the recent hedge fund action surrounding Twilio Inc. (NYSE:TWLO).

Do Hedge Funds Think TWLO Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 94 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TWLO over the last 22 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.

Is TWLO A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Christopher Lyle’s SCGE Management has the biggest position in Twilio Inc. (NYSE:TWLO), worth close to $942.1 million, corresponding to 11% of its total 13F portfolio. The second most bullish fund manager is Panayotis Takis Sparaggis of Alkeon Capital Management, with a $657.3 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish comprise Catherine D. Wood’s ARK Investment Management, Michael Pausic’s Foxhaven Asset Management and Joshua Kushner’s Thrive Capital. In terms of the portfolio weights assigned to each position Thrive Capital allocated the biggest weight to Twilio Inc. (NYSE:TWLO), around 31.83% of its 13F portfolio. Jeneq Management is also relatively very bullish on the stock, dishing out 12.94 percent of its 13F equity portfolio to TWLO.

As one would reasonably expect, key money managers were breaking ground themselves. Thrive Capital, managed by Joshua Kushner, assembled the largest position in Twilio Inc. (NYSE:TWLO). Thrive Capital had $295.1 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $65.2 million investment in the stock during the quarter. The following funds were also among the new TWLO investors: Louis Bacon’s Moore Global Investments, Robert Boucai’s Newbrook Capital Advisors, and Suraj Parkash Chopra’s Force Hill Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Twilio Inc. (NYSE:TWLO) but similarly valued. We will take a look at Humana Inc (NYSE:HUM), Illumina, Inc. (NASDAQ:ILMN), Westpac Banking Corporation (NYSE:WBK), Banco Santander, S.A. (NYSE:SAN), DuPont de Nemours Inc (NYSE:DD), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), and Dollar General Corp. (NYSE:DG). This group of 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
HUM 59 3966420 -2
ILMN 45 1747647 1
WBK 3 29715 -1
SAN 14 415472 0
DD 60 6277336 -1
REGN 46 1330342 2
DG 57 1677239 1
Average 40.6 2206310 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.6 hedge funds with bullish positions and the average amount invested in these stocks was $2206 million. That figure was $5011 million in TWLO’s case. DuPont de Nemours Inc (NYSE:DD) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Twilio Inc. (NYSE:TWLO) is more popular among hedge funds. Our overall hedge fund sentiment score for TWLO is 90. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on TWLO, though not to the same extent, as the stock returned 5.1% since the end of December (through March 19th) and outperformed the market as well.

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