Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Twitter Inc (NYSE:TWTR) to find out whether there were any major changes in hedge funds’ views.
Is TWTR stock a buy or sell? Twitter Inc (NYSE:TWTR) investors should pay attention to an increase in hedge fund sentiment recently. Twitter Inc (NYSE:TWTR) was in 78 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 75. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 75 hedge funds in our database with TWTR positions at the end of the third quarter. Our calculations also showed that TWTR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 best cheap stocks to buy now 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 (or at the end of this article). Now let’s view the latest hedge fund action encompassing Twitter Inc (NYSE:TWTR).
Do Hedge Funds Think TWTR Is A Good Stock To Buy Now?
At Q4’s end, a total of 78 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 55 hedge funds with a bullish position in TWTR a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, SRS Investment Management held the most valuable stake in Twitter Inc (NYSE:TWTR), which was worth $414.5 million at the end of the fourth quarter. On the second spot was Southpoint Capital Advisors which amassed $270.8 million worth of shares. 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 Ivy Lane Capital allocated the biggest weight to Twitter Inc (NYSE:TWTR), around 16.32% of its 13F portfolio. Tiger Legatus Capital is also relatively very bullish on the stock, designating 9.48 percent of its 13F equity portfolio to TWTR.
As aggregate interest increased, specific money managers have been driving this bullishness. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, assembled the most valuable position in Twitter Inc (NYSE:TWTR). Senator Investment Group had $54.2 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $38.2 million investment in the stock during the quarter. The following funds were also among the new TWTR investors: Jack Woodruff’s Candlestick Capital Management, Israel Englander’s Millennium Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s now review hedge fund activity in other stocks similar to Twitter Inc (NYSE:TWTR). These stocks are TAL Education Group (NYSE:TAL), Marriott International Inc (NASDAQ:MAR), Enterprise Products Partners L.P. (NYSE:EPD), ConocoPhillips (NYSE:COP), General Dynamics Corporation (NYSE:GD), IDEXX Laboratories, Inc. (NASDAQ:IDXX), and Constellation Brands, Inc. (NYSE:STZ). This group of stocks’ market values are similar to TWTR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TAL | 29 | 1970456 | -12 |
| MAR | 58 | 3421401 | 2 |
| EPD | 30 | 316886 | 0 |
| COP | 49 | 687393 | 4 |
| GD | 40 | 4955250 | 3 |
| IDXX | 46 | 2697821 | 5 |
| STZ | 58 | 1768371 | 5 |
| Average | 44.3 | 2259654 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.3 hedge funds with bullish positions and the average amount invested in these stocks was $2260 million. That figure was $2777 million in TWTR’s case. Marriott International Inc (NASDAQ:MAR) is the most popular stock in this table. On the other hand TAL Education Group (NYSE:TAL) is the least popular one with only 29 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 88. 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 returned 7% in 2021 through March 12th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on TWTR as the stock returned 25.8% since the end of December (through 3/12) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
