Is Equinix Inc (NASDAQ:EQIX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Hedge fund interest in Equinix Inc (NASDAQ:EQIX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that EQIX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). 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 PNC Financial Services Group Inc. (NYSE:PNC), Brookfield Asset Management Inc. (NYSE:BAM), and Ecolab Inc. (NYSE:ECL) to gather more data points.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s view the key hedge fund action encompassing Equinix Inc (NASDAQ:EQIX).
Do Hedge Funds Think EQIX Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in EQIX over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GQG Partners was the largest shareholder of Equinix Inc (NASDAQ:EQIX), with a stake worth $490.5 million reported as of the end of December. Trailing GQG Partners was Alkeon Capital Management, which amassed a stake valued at $344.9 million. Impax Asset Management, Rokos Capital Management, and Millennium 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 Tensile Capital allocated the biggest weight to Equinix Inc (NASDAQ:EQIX), around 6.2% of its 13F portfolio. Rokos Capital Management is also relatively very bullish on the stock, earmarking 4.28 percent of its 13F equity portfolio to EQIX.
Due to the fact that Equinix Inc (NASDAQ:EQIX) has faced a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds that slashed their entire stakes heading into Q1. Interestingly, Farallon Capital said goodbye to the largest position of all the hedgies followed by Insider Monkey, comprising about $152.2 million in stock, and Edmond M. Safra’s EMS Capital was right behind this move, as the fund dropped about $74 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Equinix Inc (NASDAQ:EQIX) but similarly valued. We will take a look at PNC Financial Services Group Inc. (NYSE:PNC), Brookfield Asset Management Inc. (NYSE:BAM), Ecolab Inc. (NYSE:ECL), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Dominion Energy Inc. (NYSE:D), Air Products & Chemicals, Inc. (NYSE:APD), and Norfolk Southern Corp. (NYSE:NSC). This group of stocks’ market values are closest to EQIX’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 44.6 hedge funds with bullish positions and the average amount invested in these stocks was $1521 million. That figure was $2001 million in EQIX’s case. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is the most popular stock in this table. On the other hand PNC Financial Services Group Inc. (NYSE:PNC) is the least popular one with only 35 bullish hedge fund positions. Equinix Inc (NASDAQ:EQIX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EQIX is 47.4. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and surpassed the market again by 1.6 percentage points. Unfortunately EQIX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EQIX investors were disappointed as the stock returned 1.4% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.