The government requires hedge funds and wealthy investors that crossed the $100 million equity holdings threshold are required to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31. We at Insider Monkey have made an extensive database of nearly 750 of those elite funds and famous investors' filings. In this article, we analyze how these elite funds and prominent investors traded Equinix Inc (NASDAQ:EQIX) based on those filings.
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 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 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.
Let's take a look at the fresh hedge fund action regarding Equinix Inc (NASDAQ:EQIX).
How have hedgies been trading Equinix Inc (NASDAQ:EQIX)?
At the end of the first quarter, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EQIX over the last 15 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Equinix Inc (NASDAQ:EQIX) was held by Alkeon Capital Management, which reported holding $221.6 million worth of stock at the end of March. It was followed by Rivulet Capital with a $194.5 million position. Other investors bullish on the company included Farallon Capital, Eminence Capital, and Citadel Investment Group.
Since Equinix Inc (NASDAQ:EQIX) has witnessed falling interest from the smart money, we can see that there lies a certain "tier" of fund managers that elected to cut their positions entirely last quarter. Intriguingly, John H. Scully's SPO Advisory Corp dumped the largest investment of the "upper crust" of funds watched by Insider Monkey, comprising about $157.9 million in stock, and Jacob Doft's Highline Capital Management was right behind this move, as the fund sold off about $100.7 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Equinix Inc (NASDAQ:EQIX) but similarly valued. We will take a look at Public Storage (NYSE:PSA), Applied Materials, Inc. (NASDAQ:AMAT), Prudential Financial Inc (NYSE:PRU), and AFLAC Incorporated (NYSE:AFL). This group of stocks' market caps resemble EQIX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PSA,25,877796,7 AMAT,42,1947656,2 PRU,31,513154,0 AFL,30,737691,3 Average,32,1019074,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $1019 million. That figure was $1724 million in EQIX's case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand Public Storage (NYSE:PSA) is the least popular one with only 25 bullish hedge fund positions. Equinix Inc (NASDAQ:EQIX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on EQIX as the stock returned 8.1% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.