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Were Hedge Funds Right About Souring On The Trade Desk, Inc. (TTD)?

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 The Trade Desk, Inc. (NASDAQ:TTD).

The Trade Desk, Inc. (NASDAQ:TTD) was in 24 hedge funds’ portfolios at the end of the second quarter of 2019. TTD has experienced a decrease in hedge fund interest recently. There were 25 hedge funds in our database with TTD holdings at the end of the previous quarter. Our calculations also showed that TTD 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.

Why do we pay any attention at all to hedge fund sentiment? 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.

D. E. Shaw

Unlike this former hedge fund manager who is convinced Dow will soar past 40000, 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 check out the key hedge fund action encompassing The Trade Desk, Inc. (NASDAQ:TTD).

What does smart money think about The Trade Desk, Inc. (NASDAQ:TTD)?

Heading into the third quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in TTD over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

TTD_oct2019

Among these funds, Citadel Investment Group held the most valuable stake in The Trade Desk, Inc. (NASDAQ:TTD), which was worth $126.3 million at the end of the second quarter. On the second spot was D E Shaw which amassed $94.6 million worth of shares. Moreover, Arrowstreet Capital, Whale Rock Capital Management, and Renaissance Technologies were also bullish on The Trade Desk, Inc. (NASDAQ:TTD), allocating a large percentage of their portfolios to this stock.

Because The Trade Desk, Inc. (NASDAQ:TTD) has faced falling interest from hedge fund managers, it’s safe to say that there was a specific group of hedgies who were dropping their full holdings by the end of the second quarter. At the top of the heap, Josh Resnick’s Jericho Capital Asset Management dumped the biggest position of all the hedgies followed by Insider Monkey, comprising close to $35.2 million in stock, and James Crichton’s Hitchwood Capital Management was right behind this move, as the fund dropped about $34.6 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Trade Desk, Inc. (NASDAQ:TTD) but similarly valued. We will take a look at Noble Energy, Inc. (NYSE:NBL), Array Biopharma Inc (NASDAQ:ARRY), United Rentals, Inc. (NYSE:URI), and Allegion plc (NYSE:ALLE). This group of stocks’ market caps match TTD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NBL 25 808173 1
ARRY 58 3051915 26
URI 44 1043608 -1
ALLE 24 406142 3
Average 37.75 1327460 7.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $1327 million. That figure was $348 million in TTD’s case. Array Biopharma Inc (NASDAQ:ARRY) is the most popular stock in this table. On the other hand Allegion plc (NYSE:ALLE) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks The Trade Desk, Inc. (NASDAQ:TTD) is even less popular than ALLE. Hedge funds dodged a bullet by taking a bearish stance towards TTD. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TTD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TTD investors were disappointed as the stock returned -17.7% during the third quarter 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 in 2019.

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

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