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Twilio Inc. (TWLO): Hedge Fund Sentiment Hits All Time High

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Twilio Inc. (NYSE:TWLO) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Twilio Inc. (NYSE:TWLO) was in 66 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 63. This means the bullish number of hedge fund positions in this stock currently sits at its new all time high. TWLO has experienced an increase in hedge fund sentiment in recent months. There were 52 hedge funds in our database with TWLO positions at the end of the first quarter. Our calculations also showed that TWLO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

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

To most shareholders, hedge funds are viewed as worthless, old financial tools of years past. While there are over 8000 funds with their doors open at the moment, We choose to focus on the moguls of this club, about 850 funds. It is estimated that this group of investors direct the lion’s share of all hedge funds’ total asset base, and by tracking their finest picks, Insider Monkey has uncovered a number of investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

David Blood

David Blood of Generation Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a look at the latest hedge fund action surrounding Twilio Inc. (NYSE:TWLO).

What have hedge funds been doing with Twilio Inc. (NYSE:TWLO)?

At second quarter’s end, a total of 66 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TWLO over the last 20 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, SCGE Management, managed by Christopher Lyle, holds the number one position in Twilio Inc. (NYSE:TWLO). SCGE Management has a $610.7 million position in the stock, comprising 11.8% of its 13F portfolio. On SCGE Management’s heels is Foxhaven Asset Management, managed by Michael Pausic, which holds a $534.1 million position; 17.9% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish encompass Chase Coleman’s Tiger Global Management LLC, Panayotis Takis Sparaggis’s Alkeon Capital Management and David Blood and Al Gore’s Generation Investment Management. In terms of the portfolio weights assigned to each position Foxhaven Asset Management allocated the biggest weight to Twilio Inc. (NYSE:TWLO), around 17.94% of its 13F portfolio. SCGE Management is also relatively very bullish on the stock, dishing out 11.79 percent of its 13F equity portfolio to TWLO.

Consequently, key money managers were leading the bulls’ herd. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, assembled the most valuable position in Twilio Inc. (NYSE:TWLO). Alkeon Capital Management had $263.9 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also initiated a $142.6 million position during the quarter. The other funds with brand new TWLO positions are Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management, and James Crichton’s Hitchwood Capital Management.

Let’s now review hedge fund activity in other stocks similar to Twilio Inc. (NYSE:TWLO). We will take a look at Cognizant Technology Solutions Corp (NASDAQ:CTSH), Chunghwa Telecom Co., Ltd (NYSE:CHT), The Allstate Corporation (NYSE:ALL), Match Group, Inc. (NASDAQ:MTCH), Ross Stores, Inc. (NASDAQ:ROST), Dow Inc. (NYSE:DOW), and KLA Corporation (NASDAQ:KLAC). All of these stocks’ market caps match TWLO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTSH 39 2593830 1
CHT 4 157957 -2
ALL 46 1451840 3
MTCH 39 1755544 1
ROST 50 767478 1
DOW 35 452224 -3
KLAC 37 661971 11
Average 35.7 1120121 1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $1120 million. That figure was $3725 million in TWLO’s case. Ross Stores, Inc. (NASDAQ:ROST) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Twilio Inc. (NYSE:TWLO) is more popular among hedge funds. Our overall hedge fund sentiment score for TWLO is 90. 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 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 28.2% in 2020 through August 24th but still managed to beat the market by 20.6 percentage points. Hedge funds were also right about betting on TWLO, though not to the same extent, as the stock returned 11.9% since the end of June and outperformed the market as well.

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