Tech Selloff: Hedge Funds are Dumping These 5 Stocks in 2022

3. Block, Inc. (NYSE:SQ)

Number of Hedge Fund Holders: 84

Decline in Hedge Fund Holders: 12

Block, Inc. (NYSE:SQ) provides financial services through its brands including Square, Cash App, TIDAL, and Spiral. It was founded by Twitter boss Jack Dorsey in 2009, and is headquartered in California. As part of the market sell-off in tech, shares of the company have posted a loss of 52.48% in the year to date as of May 25.

Investors dumped their positions in Block, Inc. (NYSE:SQ) at the close of the first quarter, where 84 hedge funds reported holding stakes in the company. This is in comparison to 96 hedge funds in the previous quarter.

On May 23, analyst Andrew Jeffrey from Truist cut his price target on Block, Inc. (NYSE:SQ) to $145 from $165, but maintained a ‘Buy’ rating on the company shares. The analyst decreased the price target owing to reduced valuations, but feels Block can become one of the world’s most important fintech firms, rivalling big names such as Visa Inc. (NYSE:V). The company’s business fundamentals are poorly understood, according to Jeffrey, who says this creates a good opportunity for long-term investors.

Farrer Wealth Advisors, an investment firm, discussed the prospects of Block, Inc. (NYSE:SQ) in its Q1 2022 investor letter. It said:

“Block (formerly Square): We ‘adopted’ Block’s stock after the company bought Afterpay, which we were investors in. We had been trimming the Afterpay position throughout 2021 and trimmed again after the acquisition, so the position was quite small. We held onto that small portion, as we did think the acquisition made sense and were excited to see the two companies integrate and for Block to create a closed loop network between merchants and consumers. However, the market punished most highly valued tech stocks over the last months, and we saw the position move against us by over 50%. We are firm believers that when a stock goes against you by 50%+, you need to do something about it. Either trim/sell and reinvest or buy more. In the case of Block, the original reason for holding was to see how the acquisition and integration with Afterpay panned out. The market did not give us the time to see this play out, thus we were not comfortable adding more to the position. Further for the stock to recover to our purchase price, we felt the company’s valuation would need to command a future exit multiple that the market would be unlikely to pay in this environment. Given this, we exited the remainder of the position.”