Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Eventbrite, Inc. (NYSE:EB).
Eventbrite, Inc. (NYSE:EB) shareholders have witnessed an increase in hedge fund interest lately. Our calculations also showed that EB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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.
Bill Miller of Miller Value Partners
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the recent hedge fund action surrounding Eventbrite, Inc. (NYSE:EB).
What have hedge funds been doing with Eventbrite, Inc. (NYSE:EB)?
At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in EB a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Michael Sidhom’s Immersion Capital has the biggest position in Eventbrite, Inc. (NYSE:EB), worth close to $79.8 million, corresponding to 11.5% of its total 13F portfolio. Sitting at the No. 2 spot is Foxhaven Asset Management, led by Michael Pausic, holding a $78.6 million position; 3.7% of its 13F portfolio is allocated to the company. Remaining peers that are bullish include Bill Miller’s Miller Value Partners, Eric Bannasch’s Cadian Capital and Zachary Miller’s Parian Global Management. In terms of the portfolio weights assigned to each position Immersion Capital allocated the biggest weight to Eventbrite, Inc. (NYSE:EB), around 11.53% of its 13F portfolio. Parian Global Management is also relatively very bullish on the stock, designating 3.89 percent of its 13F equity portfolio to EB.
Now, specific money managers were leading the bulls’ herd. Maplelane Capital, managed by Leon Shaulov, established the largest position in Eventbrite, Inc. (NYSE:EB). Maplelane Capital had $6.2 million invested in the company at the end of the quarter. Jaime Sterne’s Skye Global Management also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners and Paul Tudor Jones’s Tudor Investment Corp.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Eventbrite, Inc. (NYSE:EB) but similarly valued. These stocks are InterDigital, Inc. (NASDAQ:IDCC), USANA Health Sciences, Inc. (NYSE:USNA), Dril-Quip, Inc. (NYSE:DRQ), and Colony Credit Real Estate, Inc. (NYSE:CLNC). This group of stocks’ market caps are similar to EB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IDCC | 27 | 300116 | 0 |
| USNA | 12 | 196149 | -2 |
| DRQ | 21 | 129761 | 1 |
| CLNC | 8 | 26571 | 1 |
| Average | 17 | 163149 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $322 million in EB’s case. InterDigital, Inc. (NASDAQ:IDCC) is the most popular stock in this table. On the other hand Colony Credit Real Estate, Inc. (NYSE:CLNC) is the least popular one with only 8 bullish hedge fund positions. Eventbrite, Inc. (NYSE:EB) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately EB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EB were disappointed as the stock returned -67.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
