Should I Avoid Shift4 Payments, Inc. (FOUR)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Shift4 Payments, Inc. (NYSE:FOUR).

Shift4 Payments, Inc. (NYSE:FOUR) was in 33 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 38. FOUR has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 38 hedge funds in our database with FOUR holdings at the end of December. Our calculations also showed that FOUR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Andrew Sandler of Sandler Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. Keeping this in mind we’re going to go over the new hedge fund action encompassing Shift4 Payments, Inc. (NYSE:FOUR).

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

At the end of March, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in FOUR a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, John Smith Clark’s Southpoint Capital Advisors has the biggest position in Shift4 Payments, Inc. (NYSE:FOUR), worth close to $124.7 million, comprising 2.1% of its total 13F portfolio. Coming in second is Senator Investment Group, managed by Doug Silverman and Alexander Klabin, which holds a $82 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions comprise Josh Resnick’s Jericho Capital Asset Management, Ken Griffin’s Citadel Investment Group and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Nishkama Capital allocated the biggest weight to Shift4 Payments, Inc. (NYSE:FOUR), around 7.6% of its 13F portfolio. Hickory Lane Capital Management is also relatively very bullish on the stock, setting aside 6.45 percent of its 13F equity portfolio to FOUR.

Seeing as Shift4 Payments, Inc. (NYSE:FOUR) has experienced falling interest from hedge fund managers, logic holds that there was a specific group of money managers who sold off their full holdings by the end of the first quarter. At the top of the heap, Gabriel Plotkin’s Melvin Capital Management dumped the biggest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $37.8 million in stock. Adam Parker’s fund, Center Lake Capital, also cut its stock, about $18.9 million worth. These moves are interesting, as total hedge fund interest dropped by 5 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Shift4 Payments, Inc. (NYSE:FOUR). We will take a look at Cameco Corporation (NYSE:CCJ), CDK Global Inc (NASDAQ:CDK), Skechers USA Inc (NYSE:SKX), Plains All American Pipeline, L.P. (NASDAQ:PAA), Vir Biotechnology, Inc. (NASDAQ:VIR), SLM Corp (NASDAQ:SLM), and Envista Holdings Corporation (NYSE:NVST). This group of stocks’ market caps match FOUR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCJ 30 492804 5
CDK 18 298124 -9
SKX 29 531729 -2
PAA 7 57037 -3
VIR 9 17685 4
SLM 27 996426 8
NVST 34 889306 1
Average 22 469016 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $469 million. That figure was $539 million in FOUR’s case. Envista Holdings Corporation (NYSE:NVST) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NASDAQ:PAA) is the least popular one with only 7 bullish hedge fund positions. Shift4 Payments, Inc. (NYSE:FOUR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FOUR is 74.2. 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 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on FOUR as the stock returned 18.1% since the end of Q1 (through 7/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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