Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 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 Twitter Inc (NYSE:TWTR) in this article.
Is Twitter Inc (NYSE:TWTR) a good stock to buy now? Twitter investors should pay attention to an increase in hedge fund interest recently. Twitter Inc (NYSE:TWTR) was in 75 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 68. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TWTR 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 Singer of Elliott Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium 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. Keeping this in mind we’re going to take a glance at the new hedge fund action regarding Twitter Inc (NYSE:TWTR).
Hedge fund activity in Twitter Inc (NYSE:TWTR)
At the end of September, a total of 75 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. By comparison, 55 hedge funds held shares or bullish call options in TWTR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, SRS Investment Management was the largest shareholder of Twitter Inc (NYSE:TWTR), with a stake worth $347.5 million reported as of the end of September. Trailing SRS Investment Management was Southpoint Capital Advisors, which amassed a stake valued at $222.5 million. Appaloosa Management LP, Citadel Investment Group, and Elliott Investment 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 Kerrisdale Capital allocated the biggest weight to Twitter Inc (NYSE:TWTR), around 9.96% of its 13F portfolio. Ancient Art (Teton Capital) is also relatively very bullish on the stock, dishing out 9.76 percent of its 13F equity portfolio to TWTR.
As industrywide interest jumped, some big names have been driving this bullishness. Jericho Capital Asset Management, managed by Josh Resnick, created the most valuable position in Twitter Inc (NYSE:TWTR). Jericho Capital Asset Management had $100.4 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also initiated a $44.5 million position during the quarter. The following funds were also among the new TWTR investors: Phill Gross and Robert Atchinson’s Adage Capital Management, Keith Meister’s Corvex Capital, and James Dinan’s York Capital Management.
Let’s go over hedge fund activity in other stocks similar to Twitter Inc (NYSE:TWTR). These stocks are Cintas Corporation (NASDAQ:CTAS), Southern Copper Corporation (NYSE:SCCO), Dow Inc. (NYSE:DOW), NXP Semiconductors NV (NASDAQ:NXPI), Exelon Corporation (NASDAQ:EXC), Chipotle Mexican Grill, Inc. (NYSE:CMG), and Enterprise Products Partners L.P. (NYSE:EPD). This group of stocks’ market caps resemble TWTR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTAS | 38 | 741729 | 4 |
| SCCO | 27 | 347458 | 8 |
| DOW | 42 | 512456 | 7 |
| NXPI | 68 | 1636793 | 1 |
| EXC | 29 | 848331 | -1 |
| CMG | 52 | 3905349 | 11 |
| EPD | 30 | 178191 | 0 |
| Average | 40.9 | 1167187 | 4.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.9 hedge funds with bullish positions and the average amount invested in these stocks was $1167 million. That figure was $2151 million in TWTR’s case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Twitter Inc (NYSE:TWTR) is more popular among hedge funds. Our overall hedge fund sentiment score for TWTR 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 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 November 27th and still beat the market by 16.1 percentage points. Unfortunately TWTR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TWTR were disappointed as the stock returned 4.7% since the end of the third quarter (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 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.
