Skillz Inc. (SKLZ) Fell Out Of Favor With Hedge Funds

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on Skillz Inc. (NYSE:SKLZ).

Is Skillz Inc. (NYSE:SKLZ) ready to rally soon? Hedge funds were turning less bullish. The number of bullish hedge fund bets decreased by 7 lately. Skillz Inc. (NYSE:SKLZ) was in 26 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 33. Our calculations also showed that SKLZ isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

If you’d ask most shareholders, hedge funds are viewed as worthless, old investment tools of the past. While there are more than 8000 funds trading today, Our researchers look at the elite of this club, around 850 funds. These money managers direct the lion’s share of all hedge funds’ total asset base, and by tailing their first-class investments, Insider Monkey has identified several investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Cathie Wood ARK Investment Management

Cathie Wood of ARK Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. With all of this in mind we’re going to review the key hedge fund action surrounding Skillz Inc. (NYSE:SKLZ).

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

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the fourth quarter of 2020. By comparison, 0 hedge funds held shares or bullish call options in SKLZ a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

More specifically, Wildcat Capital Management was the largest shareholder of Skillz Inc. (NYSE:SKLZ), with a stake worth $404.9 million reported as of the end of March. Trailing Wildcat Capital Management was ARK Investment Management, which amassed a stake valued at $114.5 million. Washington Harbour Partners, Millennium Management, and Luminus 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 Wildcat Capital Management allocated the biggest weight to Skillz Inc. (NYSE:SKLZ), around 49.45% of its 13F portfolio. Washington Harbour Partners is also relatively very bullish on the stock, setting aside 8.84 percent of its 13F equity portfolio to SKLZ.

Judging by the fact that Skillz Inc. (NYSE:SKLZ) has witnessed declining sentiment from hedge fund managers, we can see that there were a few funds who sold off their full holdings last quarter. It’s worth mentioning that Phill Gross and Robert Atchinson’s Adage Capital Management dumped the biggest stake of the 750 funds tracked by Insider Monkey, comprising about $40.5 million in stock, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt. was right behind this move, as the fund sold off about $16 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 7 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Skillz Inc. (NYSE:SKLZ). These stocks are Tetra Tech, Inc. (NASDAQ:TTEK), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), Donaldson Company, Inc. (NYSE:DCI), Hill-Rom Holdings, Inc. (NYSE:HRC), Advanced Drainage Systems Inc. (NYSE:WMS), BRP Inc. (NASDAQ:DOOO), and Euronet Worldwide, Inc. (NASDAQ:EEFT). All of these stocks’ market caps match SKLZ’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TTEK 23 95089 -6
LECO 19 283252 -1
DCI 28 279375 2
HRC 30 454507 2
WMS 29 1220549 4
DOOO 17 196834 2
EEFT 40 511517 8
Average 26.6 434446 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $434 million. That figure was $673 million in SKLZ’s case. Euronet Worldwide, Inc. (NASDAQ:EEFT) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 17 bullish hedge fund positions. Skillz Inc. (NYSE:SKLZ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SKLZ is 41.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately SKLZ wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SKLZ investors were disappointed as the stock returned -6.8% since the end of March (through 7/9) 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 in 2021.

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