Was The Smart Money Right About Piling Into Farfetch Limited (FTCH)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 887 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Farfetch Limited (NYSE:FTCH).

Is Farfetch Limited (NYSE:FTCH) a healthy stock for your portfolio? The best stock pickers were in an optimistic mood. The number of bullish hedge fund positions improved by 7 recently. Farfetch Limited (NYSE:FTCH) was in 47 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 43. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FTCH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 40 hedge funds in our database with FTCH positions at the end of the third quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Brad Gerstner Altimeter Capital

Brad Gerstner of Altimeter Capital

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. Now we’re going to view the recent hedge fund action encompassing Farfetch Limited (NYSE:FTCH).

Do Hedge Funds Think FTCH Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the previous quarter. By comparison, 27 hedge funds held shares or bullish call options in FTCH a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, Lone Pine Capital held the most valuable stake in Farfetch Limited (NYSE:FTCH), which was worth $514.6 million at the end of the fourth quarter. On the second spot was Tybourne Capital Management which amassed $341.7 million worth of shares. Altimeter Capital Management, Renaissance Technologies, and Citadel Investment Group 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 Kuvari Partners allocated the biggest weight to Farfetch Limited (NYSE:FTCH), around 16.92% of its 13F portfolio. One01 Capital is also relatively very bullish on the stock, earmarking 8.62 percent of its 13F equity portfolio to FTCH.

Consequently, specific money managers were leading the bulls’ herd. Lone Pine Capital, created the most valuable position in Farfetch Limited (NYSE:FTCH). Lone Pine Capital had $514.6 million invested in the company at the end of the quarter. Alex Sacerdote’s Whale Rock Capital Management also made a $182.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Gaurav Kapadia’s XN Exponent Advisors, Vikram Kumar’s Kuvari Partners, and Gavin Baker’s Atreides Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Farfetch Limited (NYSE:FTCH) but similarly valued. These stocks are PPL Corporation (NYSE:PPL), Church & Dwight Co., Inc. (NYSE:CHD), MarketAxess Holdings Inc. (NASDAQ:MKTX), MongoDB, Inc. (NASDAQ:MDB), Baker Hughes Company (NYSE:BKR), Kellogg Company (NYSE:K), and Telefonica S.A. (NYSE:TEF). This group of stocks’ market values match FTCH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPL 21 152416 0
CHD 38 1131247 2
MKTX 34 945720 0
MDB 36 2105361 -6
BKR 35 694644 7
K 37 567314 2
TEF 5 9555 0
Average 29.4 800894 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $801 million. That figure was $3035 million in FTCH’s case. Church & Dwight Co., Inc. (NYSE:CHD) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Farfetch Limited (NYSE:FTCH) is more popular among hedge funds. Our overall hedge fund sentiment score for FTCH 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 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 still beat the market by 1.6 percentage points. Unfortunately FTCH wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FTCH were disappointed as the stock returned -23.2% since the end of the fourth quarter (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 since 2019.

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