Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Affirm Holdings, Inc. (NASDAQ:AFRM) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Affirm Holdings, Inc. (NASDAQ:AFRM) has seen an increase in enthusiasm from smart money in recent months. Affirm Holdings, Inc. (NASDAQ:AFRM) was in 39 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AFRM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we’re going to analyze the fresh hedge fund action surrounding Affirm Holdings, Inc. (NASDAQ:AFRM).
Colin Moran of Abdiel Capital Advisors
Do Hedge Funds Think AFRM Is A Good Stock To Buy Now?
At Q3’s end, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 56% from the second quarter of 2021. On the other hand, there were a total of 0 hedge funds with a bullish position in AFRM a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Melvin Capital Management was the largest shareholder of Affirm Holdings, Inc. (NASDAQ:AFRM), with a stake worth $381.2 million reported as of the end of September. Trailing Melvin Capital Management was Melvin Capital Management, which amassed a stake valued at $274 million. Abdiel Capital Advisors, Citadel Investment Group, and Coatue 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 ThornTree Capital Partners allocated the biggest weight to Affirm Holdings, Inc. (NASDAQ:AFRM), around 9.22% of its 13F portfolio. Ogborne Capital is also relatively very bullish on the stock, earmarking 8.44 percent of its 13F equity portfolio to AFRM.
As aggregate interest increased, key hedge funds were breaking ground themselves. Melvin Capital Management, managed by Gabriel Plotkin, established the most valuable position in Affirm Holdings, Inc. (NASDAQ:AFRM). Melvin Capital Management had $381.2 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also made a $274 million investment in the stock during the quarter. The other funds with new positions in the stock are Philippe Laffont’s Coatue Management, Josh Resnick’s Jericho Capital Asset Management, and James Crichton’s Hitchwood Capital Management.
Let’s go over hedge fund activity in other stocks similar to Affirm Holdings, Inc. (NASDAQ:AFRM). These stocks are Verisk Analytics, Inc. (NASDAQ:VRSK), EPAM Systems Inc (NYSE:EPAM), Nasdaq, Inc. (NASDAQ:NDAQ), Cummins Inc. (NYSE:CMI), Barrick Gold Corporation (NYSE:GOLD), Rocket Companies, Inc. (NYSE:RKT), and Mettler-Toledo International Inc. (NYSE:MTD). This group of stocks’ market caps resemble AFRM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VRSK | 25 | 1638278 | -11 |
| EPAM | 42 | 945738 | 9 |
| NDAQ | 21 | 257290 | -2 |
| CMI | 30 | 830044 | -15 |
| GOLD | 41 | 917695 | -6 |
| RKT | 17 | 100749 | 4 |
| MTD | 31 | 1109108 | -4 |
| Average | 29.6 | 828415 | -3.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $828 million. That figure was $1491 million in AFRM’s case. EPAM Systems Inc (NYSE:EPAM) is the most popular stock in this table. On the other hand Rocket Companies, Inc. (NYSE:RKT) is the least popular one with only 17 bullish hedge fund positions. Affirm Holdings, Inc. (NASDAQ:AFRM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AFRM is 84. 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 positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, AFRM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AFRM were disappointed as the stock returned -46.2% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Affirm Holdings Inc. (NASDAQ:AFRM)
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Disclosure: None. This article was originally published at Insider Monkey.
