Should You Avoid Tradeweb Markets Inc. (TW)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Tradeweb Markets Inc. (NASDAQ:TW) based on those filings.

Is Tradeweb Markets Inc. (NASDAQ:TW) a safe investment right now? Hedge funds are taking a bearish view. The number of long hedge fund bets dropped by 6 recently. Our calculations also showed that TW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). TW was in 30 hedge funds’ portfolios at the end of March. There were 36 hedge funds in our database with TW positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most investors, hedge funds are assumed to be worthless, old financial vehicles of the past. While there are over 8000 funds trading today, Our researchers choose to focus on the masters of this group, around 850 funds. It is estimated that this group of investors administer bulk of all hedge funds’ total asset base, and by tailing their finest picks, Insider Monkey has figured out a number of investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Joel Greenblatt of Gotham Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the new hedge fund action regarding Tradeweb Markets Inc. (NASDAQ:TW).

How are hedge funds trading Tradeweb Markets Inc. (NASDAQ:TW)?

At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TW over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is TW A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Panayotis Takis Sparaggis’s Alkeon Capital Management has the largest position in Tradeweb Markets Inc. (NASDAQ:TW), worth close to $60.3 million, corresponding to 0.3% of its total 13F portfolio. The second most bullish fund manager is Samlyn Capital, led by Robert Pohly, holding a $52.3 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of John Overdeck and David Siegel’s Two Sigma Advisors,  Amit Nitin Doshi’s Harbor Spring Capital. In terms of the portfolio weights assigned to each position Parsifal Capital Management allocated the biggest weight to Tradeweb Markets Inc. (NASDAQ:TW), around 8.11% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, setting aside 3.66 percent of its 13F equity portfolio to TW.

Judging by the fact that Tradeweb Markets Inc. (NASDAQ:TW) has experienced declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of money managers who were dropping their positions entirely in the first quarter. Intriguingly, Doug Silverman and Alexander Klabin’s Senator Investment Group said goodbye to the largest stake of all the hedgies followed by Insider Monkey, valued at an estimated $69.5 million in stock, and James Parsons’s Junto Capital Management was right behind this move, as the fund sold off about $42.1 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 6 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tradeweb Markets Inc. (NASDAQ:TW) but similarly valued. These stocks are Cable One Inc (NYSE:CABO), Carnival Corporation (NYSE:CCL), Qorvo Inc (NASDAQ:QRVO), and Varian Medical Systems, Inc. (NYSE:VAR). All of these stocks’ market caps are closest to TW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CABO 23 674859 4
CCL 31 146189 -3
QRVO 39 1165693 -6
VAR 25 439921 -5
Average 29.5 606666 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $607 million. That figure was $355 million in TW’s case. Qorvo Inc (NASDAQ:QRVO) is the most popular stock in this table. On the other hand Cable One Inc (NYSE:CABO) is the least popular one with only 23 bullish hedge fund positions. Tradeweb Markets Inc. (NASDAQ:TW) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on TW as the stock returned 57.1% in Q2 (through the end of May) 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.