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Should I Buy Eventbrite, Inc. (EB)?

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·6 min read
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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Eventbrite, Inc. (NYSE:EB) changed recently.

Eventbrite, Inc. (NYSE:EB) has seen an increase in support from the world's most elite money managers recently. Eventbrite, Inc. (NYSE:EB) was in 25 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 26. There were 24 hedge funds in our database with EB positions at the end of the first quarter. Our calculations also showed that EB isn't among the 30 most popular stocks among hedge funds (click for Q2 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 79 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.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's view the key hedge fund action encompassing Eventbrite, Inc. (NYSE:EB).

Do Hedge Funds Think EB Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in EB a year ago. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Broad Bay Capital was the largest shareholder of Eventbrite, Inc. (NYSE:EB), with a stake worth $39.2 million reported as of the end of June. Trailing Broad Bay Capital was Portsea Asset Management, which amassed a stake valued at $35.2 million. Millennium Management, Cadian Capital, and Vista Equity Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Portsea Asset Management allocated the biggest weight to Eventbrite, Inc. (NYSE:EB), around 19.31% of its 13F portfolio. Sabrepoint Capital is also relatively very bullish on the stock, dishing out 7.48 percent of its 13F equity portfolio to EB.

As aggregate interest increased, key hedge funds were leading the bulls' herd. Renaissance Technologies, established the most outsized position in Eventbrite, Inc. (NYSE:EB). Renaissance Technologies had $7.9 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $3.8 million investment in the stock during the quarter. The following funds were also among the new EB investors: Dmitry Balyasny's Balyasny Asset Management, Michael Gelband's ExodusPoint Capital, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.

Let's now review hedge fund activity in other stocks similar to Eventbrite, Inc. (NYSE:EB). These stocks are Frontline Ltd (NYSE:FRO), Lithium Americas Corp. (NYSE:LAC), TPI Composites, Inc. (NASDAQ:TPIC), Atea Pharmaceuticals, Inc. (NASDAQ:AVIR), Tri Continental Corporation (NYSE:TY), RadNet Inc. (NASDAQ:RDNT), and Avid Technology, Inc. (NASDAQ:AVID). This group of stocks' market values are closest to EB's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FRO,13,26574,3 LAC,9,31872,-1 TPIC,20,160838,2 AVIR,17,375628,4 TY,3,1268,1 RDNT,17,115529,3 AVID,21,568311,-1 Average,14.3,182860,1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.3 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $299 million in EB's case. Avid Technology, Inc. (NASDAQ:AVID) is the most popular stock in this table. On the other hand Tri Continental Corporation (NYSE:TY) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Eventbrite, Inc. (NYSE:EB) is more popular among hedge funds. Our overall hedge fund sentiment score for EB is 84.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24% in 2021 through October 22nd but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on EB as the stock returned 6.9% since the end of June (through 10/22) 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.