Twitter Inc (TWTR): Smart Money Remains Mostly on the Sidelines

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets is required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning stocks. However, if you’re not wealthy, hedge funds and other big asset managers can still do the due diligence and analysis for you, through their highly-skilled research teams and vast resources. All you have to do is track their filings to see the latest moves made by these skilled investors, which is exactly what we do at Insider Monkey. With that in mind, let’s look at the latest hedge fund activity in Twitter Inc (NYSE:TWTR) and see how the stock has been traded lately.

Twitter has traditionally been a stock that the hedge funds in our database haven’t particularly cared for, and that didn’t change much during the fourth quarter. 30 investors in our system were long Twitter, owning just 2% of the company’s stock in aggregate. However, the ownership figure of 30 did represent an increase of 3 quarter-over-quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Grupo Televisa SAB (ADR) (NYSE:TV), Cummins Inc. (NYSE:CMI), and International Paper Company (NYSE:IP) to gather more data points.

Despite a social media platform that is ubiquitous in our culture on about the same level as Facebook, it was a poor 2015 for Twitter, which is struggling to get casual users on its platform and engaged with each other. Instead, Twitter is a rather lonely existence for many users, who end up following a bunch of celebrities and newsmakers but end up having little to no actual interaction with anybody. Twitter is aware of the problem and has introduced several changes to its platform, with more in store, but it’s unclear if any of them will help meaningfully turn around the site’s fledgling user growth.

Baron Funds had this to say about Twitter in its fourth quarter letter to investors:

“After reporting strong 2014 results and an upbeat outlook, shares of Twitter, Inc. (NYSE:TWTR) rose 40% in the first quarter of the year. Well… it turned out the upbeat outlook was premature, as slower user growth and management’s apparent inability to execute on what most investors perceived as fairly low hanging fruit resulted in a loss of momentum, investor confidence and a continued decline in the price of the stock for the rest of the year. Jack Dorsey, the original inventor and founder of Twitter, was brought back in the hopes of rekindling the spirit of innovation and reinvigorating user growth and engagement on the platform. It appears that there is no quick fix and that getting Twitter back on track may take some time. Having said that, we continue to believe that Twitter is a unique and valuable communications platform for all major events unfolding live, in real time, around the world. It is still in the early stages of monetization and evolution as a platform, and we believe they will figure it out.”

With Twitter shares down by 15% this year and by 58% over the past 12 months, and with the platform seemingly in no danger of losing its esteemed position as a go-to source for breaking news and celebrity chatter, it appears that there isn’t much downside from current levels at the very least, which does make the stock somewhat attractive given the vast potential for growth in the platform if management can get right, as Baron Funds believes that it eventually will.

Let’s go ahead and view the latest hedge fund action surrounding Twitter Inc (NYSE:TWTR).

What does the smart money think about Twitter Inc (NYSE:TWTR)?

At Q4’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, an 11% rise from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or had already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the biggest call position in Twitter Inc (NYSE:TWTR), worth close to $36.7 million, amounting to less than 0.1% of its total 13F portfolio. The second most bullish fund manager is Dmitry Balyasny of Balyasny Asset Management, with a $33 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish include D E Shaw, Brian Ashford-Russell and Tim Woolley’s Polar Capital, and Steve Cohen’s Point72 Asset Management.

Consequently, key hedge funds have been driving this bullishness. Point72 Asset Management assembled the most valuable new position in Twitter Inc (NYSE:TWTR). Point72 Asset Management had $21.1 million invested in the company at the end of the quarter. Sanford J. Colen’s Apex Capital also made a $19.5 million investment in the stock during the quarter. The following funds were also among the new TWTR investors: Philippe Jabre’s Jabre Capital Partners, Israel Englander’s Millennium Management, and Adam Wolfberg and Steven Landry’s EastBay Asset Management.

Let’s also examine hedge fund activity in other stocks similar to Twitter Inc (NYSE:TWTR). We will take a look at Grupo Televisa SAB (ADR) (NYSE:TV), Cummins Inc. (NYSE:CMI), International Paper Company (NYSE:IP), and Mead Johnson Nutrition CO (NYSE:MJN). All of these stocks’ market caps are closest to TWTR’s market cap.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $1.05 billion. That figure was $321 million in TWTR’s case. Mead Johnson Nutrition CO (NYSE:MJN) is the most popular stock in this table. On the other hand Grupo Televisa SAB (ADR) (NYSE:TV) is the least popular one with only 22 bullish hedge fund positions. Twitter Inc (NYSE:TWTR) is not the most popular stock in this group but hedge fund interest is still above average, though the amount of capital invested in the stock is less than any of the above stocks. However, Twitter was the only stock with positive sentiment during the quarter, which may make it worth a closer look.