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Were Hedge Funds Right About Piling Into Twitter Inc (TWTR)?

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 28. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Twitter Inc (NYSE:TWTR).

Twitter Inc (NYSE:TWTR) has experienced an increase in enthusiasm from smart money recently. TWTR was in 47 hedge funds’ portfolios at the end of the second quarter of 2019. There were 46 hedge funds in our database with TWTR holdings at the end of the previous quarter. Our calculations also showed that TWTR isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TWTR_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the recent hedge fund action regarding Twitter Inc (NYSE:TWTR).

Hedge fund activity in Twitter Inc (NYSE:TWTR)

Heading into the third quarter of 2019, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in TWTR over the last 16 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

CITADEL INVESTMENT GROUP

The largest stake in Twitter Inc (NYSE:TWTR) was held by D E Shaw, which reported holding $286.2 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $256.1 million position. Other investors bullish on the company included SRS Investment Management, Citadel Investment Group, and Citadel Investment Group.

Now, key hedge funds have jumped into Twitter Inc (NYSE:TWTR) headfirst. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, initiated the largest position in Twitter Inc (NYSE:TWTR). Alkeon Capital Management had $68.9 million invested in the company at the end of the quarter. Christopher James’s Partner Fund Management also made a $45 million investment in the stock during the quarter. The other funds with brand new TWTR positions are Brandon Haley’s Holocene Advisors, and Mike Masters’s Masters Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Twitter Inc (NYSE:TWTR) but similarly valued. We will take a look at SunTrust Banks, Inc. (NYSE:STI), Motorola Solutions Inc (NYSE:MSI), TD Ameritrade Holding Corp. (NASDAQ:AMTD), and Fiat Chrysler Automobiles NV (NYSE:FCAU). This group of stocks’ market valuations are closest to TWTR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STI 31 912417 9
MSI 25 867800 -4
AMTD 22 485654 -8
FCAU 28 1924226 1
Average 26.5 1047524 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $1048 million. That figure was $1638 million in TWTR’s case. SunTrust Banks, Inc. (NYSE:STI) is the most popular stock in this table. On the other hand TD Ameritrade Holding Corp. (NASDAQ:AMTD) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Twitter Inc (NYSE:TWTR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on TWTR as the stock returned 18.1% during Q3 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.

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

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