Value Investor Insight is an investment newsletter created by money manager Whitney Tilson and John Heins. Value Investor Insight aims to deliver the highest-quality investment ideas, analysis, and insight to the just-starting-out investor and sophisticated investors. At the core of Value Investor Insight is the philosophy of the true value investor: buy something only for less than its intrinsic worth. In a recent edition of Value Investor Insight, Harris Associates’ Bill Nygren highlighted the top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. You can download a copy of Value Investor Insight here.
In the said letter, Bill Nygren highlighted a few stocks and Pinterest Inc. (NYSE:PINS) is one of them. Pinterest is a social networking service. Year-to-date, Pinterest Inc. (NYSE:PINS) stock gained 20.8% and on June 23rd it had a closing price of $24.07. Here is what Bill Nygren said:
“Pinterest is actually the first of the examples I gave earlier of the two $20 stocks falling to $10. They have $3 per share in net cash on the balance sheet and the stock traded above $30 post its 2019 IPO, but it was in the low-$20s as the market was peaking in February. It then went to $10 at the trough, a nearly 60% decline.
Pinterest’s basic business is as an online discovery tool for people looking for ideas and inspiration for any number of things, from remodeling a room, to planning a wedding, to planning a vacation. You put on your board pictures that represent what you like and are then given suggestions consistent with your posts. Unlike many consumer-Internet companies, users and advertisers are fundamentally aligned. Customers are showing intention to spend on very specific areas, and welcome information from manufacturers and service providers who have something to sell that’s consistent with what they have indicated they like. Advertising is welcomed, which is often not the case in a lot of social media.
The company isn’t yet making money because it has incremental costs in preparing to be a much larger-scale enterprise than it currently is, and also because it is still in the early days of monetizing its platform. The priority to grow users – which now number more than 300 million on average each month, growing 15% a year – is higher than the priority to maximize advertising per user.
So key to our analysis is making an educated guess on where Pinterest can go in monetizing its platform, based on what we’ve seen in other businesses. A company like Twitter generates annual revenue per average monthly user in the low-teens, which is about half of what Facebook gets. In terms of time spent on the plat-form, Pinterest and Twitter are similar, but Pinterest strikes us as the more attractive environment for both the advertiser and user. Nobody’s claiming the Russians used Pinterest, for example, to influence the last election. It doesn’t seem heroic to assume as Pinterest’s business model matures that its revenue-per-user ends up at a spot similar to where Twitter is.”
As a result, you can see Bill Nygren believes Pinterest Inc. (NYSE:PINS) has the potential to be the next Twitter Inc. (NYSE:TWTR). In Q1 2020, the number of bullish hedge fund positions on Pinterest Inc. (NYSE:PINS) stock increased by about 3% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Pinterest’s upside potential. Our calculations showed that Pinterest Inc. (NYSE:PINS) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:
Disclosure: None. This article is originally published at Insider Monkey.