Paypal Holdings Inc (PYPL) Fell Out Of Favor With Hedge Funds

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 867 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30th holdings, data that is available nowhere else. Should you consider Paypal Holdings Inc (NASDAQ:PYPL) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is Paypal Holdings Inc (NASDAQ:PYPL) a buy here? Hedge funds were cutting their exposure. The number of long hedge fund positions decreased by 20 recently. Paypal Holdings Inc (NASDAQ:PYPL) was in 123 hedge funds’ portfolios at the end of September. The all time high for this statistic is 150. Our calculations also showed that PYPL ranked #9 among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 143 hedge funds in our database with PYPL positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks 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. With all of this in mind let’s take a gander at the latest hedge fund action regarding Paypal Holdings Inc (NASDAQ:PYPL).


Philippe Laffont of Coatue Management

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

At the end of September, a total of 123 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PYPL over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

The largest stake in Paypal Holdings Inc (NASDAQ:PYPL) was held by Fundsmith LLP, which reported holding $3197.7 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $3120.6 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Coatue Management. In terms of the portfolio weights assigned to each position Ogborne Capital allocated the biggest weight to Paypal Holdings Inc (NASDAQ:PYPL), around 26.29% of its 13F portfolio. Portland Hill Asset Management is also relatively very bullish on the stock, designating 13.89 percent of its 13F equity portfolio to PYPL.

Because Paypal Holdings Inc (NASDAQ:PYPL) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies who were dropping their positions entirely by the end of the third quarter. It’s worth mentioning that Masayoshi Son’s SB Management dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth about $702.3 million in stock. Gabriel Plotkin’s fund, Melvin Capital Management, also cut its stock, about $291.5 million worth. These transactions are important to note, as total hedge fund interest dropped by 20 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Paypal Holdings Inc (NASDAQ:PYPL) but similarly valued. We will take a look at Adobe Inc. (NASDAQ:ADBE), Netflix, Inc. (NASDAQ:NFLX),, inc. (NYSE:CRM), Comcast Corporation (NASDAQ:CMCSA), Royal Dutch Shell plc (NYSE:RDS), Exxon Mobil Corporation (NYSE:XOM), and Toyota Motor Corporation (NYSE:TM). This group of stocks’ market values resemble PYPL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADBE 95 12682168 6
NFLX 106 14759355 -7
CRM 119 14900848 11
CMCSA 75 8547154 -9
RDS 33 2053904 -5
XOM 64 4640444 -4
TM 10 876130 -2
Average 71.7 8351429 -1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 71.7 hedge funds with bullish positions and the average amount invested in these stocks was $8351 million. That figure was $12881 million in PYPL’s case., inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Paypal Holdings Inc (NASDAQ:PYPL) is more popular among hedge funds. Our overall hedge fund sentiment score for PYPL is 90.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately PYPL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PYPL were disappointed as the stock returned -28.9% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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