In this article we will check out the progression of hedge fund sentiment towards Twitter Inc (NYSE:TWTR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Twitter Inc (NYSE:TWTR) was in 68 hedge funds’ portfolios at the end of June. The all time high for this statistics is 55. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TWTR shareholders have witnessed an increase in enthusiasm from smart money recently. There were 55 hedge funds in our database with TWTR positions at the end of the first quarter. Our calculations also showed that TWTR 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Tepper of Appaloosa Management LP
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a look at the new hedge fund action surrounding Twitter Inc (NYSE:TWTR).
What have hedge funds been doing with Twitter Inc (NYSE:TWTR)?
At the end of the second quarter, a total of 68 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the previous quarter. By comparison, 47 hedge funds held shares or bullish call options in TWTR a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Tepper’s Appaloosa Management LP has the most valuable position in Twitter Inc (NYSE:TWTR), worth close to $165.3 million, amounting to 2.9% of its total 13F portfolio. The second most bullish fund manager is John Smith Clark of Southpoint Capital Advisors, with a $163.8 million position; 4% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism consist of Ken Griffin’s Citadel Investment Group, Brett Barakett’s Tremblant Capital and Paul Singer’s Elliott Investment Management. In terms of the portfolio weights assigned to each position Kerrisdale Capital allocated the biggest weight to Twitter Inc (NYSE:TWTR), around 9.94% of its 13F portfolio. Kingstown Capital Management is also relatively very bullish on the stock, dishing out 9.12 percent of its 13F equity portfolio to TWTR.
With a general bullishness amongst the heavyweights, some big names have jumped into Twitter Inc (NYSE:TWTR) headfirst. SRS Investment Management, managed by Karthik Sarma, created the largest position in Twitter Inc (NYSE:TWTR). SRS Investment Management had $98 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $41.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael A. Price and Amos Meron’s Empyrean Capital Partners, David Brown’s Hawk Ridge Management, and Leon Shaulov’s Maplelane Capital.
Let’s also examine hedge fund activity in other stocks similar to Twitter Inc (NYSE:TWTR). These stocks are Marvell Technology Group Ltd. (NASDAQ:MRVL), American Water Works Company, Inc. (NYSE:AWK), XP Inc. (NASDAQ:XP), Williams Companies, Inc. (NYSE:WMB), Ecopetrol S.A. (NYSE:EC), Fortive Corporation (NYSE:FTV), and China Telecom Corporation Limited (NYSE:CHA). All of these stocks’ market caps are closest to TWTR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MRVL | 41 | 664690 | 12 |
| AWK | 30 | 653000 | 0 |
| XP | 21 | 430821 | 8 |
| WMB | 41 | 466723 | -6 |
| EC | 11 | 113508 | -1 |
| FTV | 35 | 1372140 | 0 |
| CHA | 5 | 30145 | 0 |
| Average | 26.3 | 533004 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $533 million. That figure was $1278 million in TWTR’s case. Marvell Technology Group Ltd. (NASDAQ:MRVL) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Twitter Inc (NYSE:TWTR) is more popular among hedge funds. Our overall hedge fund sentiment score for TWTR 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 returned 29.2% in 2020 through October 16th but still managed to beat the market by 19.7 percentage points. Hedge funds were also right about betting on TWTR as the stock returned 53.8% since the end of June (through 10/16) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
