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The Trade Desk, Inc. (TTD): Hedge Funds Going Back and Forth

In this article you are going to find out whether hedge funds think The Trade Desk, Inc. (NASDAQ:TTD) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is The Trade Desk, Inc. (NASDAQ:TTD) a buy, sell, or hold? The smart money is betting on the stock. The number of bullish hedge fund positions advanced by 1 in recent months. Our calculations also showed that TTD 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). TTD was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. There were 24 hedge funds in our database with TTD positions at the end of the previous quarter.

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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. With all of this in mind let’s take a look at the key hedge fund action encompassing The Trade Desk, Inc. (NASDAQ:TTD).

Hedge fund activity in The Trade Desk, Inc. (NASDAQ:TTD)

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the fourth quarter of 2019. By comparison, 25 hedge funds held shares or bullish call options in TTD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Alkeon Capital Management held the most valuable stake in The Trade Desk, Inc. (NASDAQ:TTD), which was worth $193 million at the end of the third quarter. On the second spot was D E Shaw which amassed $164.2 million worth of shares. Zevenbergen Capital Investments, Citadel Investment Group, and Renaissance Technologies 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 Ogborne Capital allocated the biggest weight to The Trade Desk, Inc. (NASDAQ:TTD), around 5.51% of its 13F portfolio. Zevenbergen Capital Investments is also relatively very bullish on the stock, designating 4.13 percent of its 13F equity portfolio to TTD.

As one would reasonably expect, specific money managers were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the biggest position in The Trade Desk, Inc. (NASDAQ:TTD). Two Sigma Advisors had $17.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $9.4 million position during the quarter. The other funds with new positions in the stock are Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, Principal Global Investors’s Columbus Circle Investors, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Trade Desk, Inc. (NASDAQ:TTD) but similarly valued. These stocks are Celanese Corporation (NYSE:CE), Black Knight, Inc. (NYSE:BKI), Cypress Semiconductor Corporation (NASDAQ:CY), and C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW). This group of stocks’ market values match TTD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CE 29 509076 -2
BKI 32 372352 1
CY 46 2083415 10
CHRW 32 247903 8
Average 34.75 803187 4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.75 hedge funds with bullish positions and the average amount invested in these stocks was $803 million. That figure was $394 million in TTD’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand Celanese Corporation (NYSE:CE) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks The Trade Desk, Inc. (NASDAQ:TTD) is even less popular than CE. Hedge funds clearly dropped the ball on TTD as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on TTD as the stock returned 90.9% so far in the second quarter and outperformed the market by an even larger margin.

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