Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of eBay Inc (NASDAQ:EBAY) based on that data and determine whether they were really smart about the stock.
eBay Inc (NASDAQ:EBAY) investors should pay attention to an increase in hedge fund interest of late. eBay Inc (NASDAQ:EBAY) was in 58 hedge funds' portfolios at the end of June. The all time high for this statistics is 83. There were 52 hedge funds in our database with EBAY positions at the end of the first quarter. Our calculations also showed that EBAY isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: 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' 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 58 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.
Seth Klarman of Baupost Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let's check out the recent hedge fund action regarding eBay Inc (NASDAQ:EBAY).
How are hedge funds trading eBay Inc (NASDAQ:EBAY)?
Heading into the third quarter of 2020, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. By comparison, 47 hedge funds held shares or bullish call options in EBAY a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Seth Klarman's Baupost Group has the number one position in eBay Inc (NASDAQ:EBAY), worth close to $1.6829 billion, accounting for 21% of its total 13F portfolio. Coming in second is Renaissance Technologies, which holds a $696.5 million position; 0.6% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism include Paul Singer's Elliott Investment Management, Nicolai Tangen's Ako Capital and Noam Gottesman's GLG Partners. In terms of the portfolio weights assigned to each position Baupost Group allocated the biggest weight to eBay Inc (NASDAQ:EBAY), around 21.01% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, earmarking 8.61 percent of its 13F equity portfolio to EBAY.
Now, specific money managers were leading the bulls' herd. Honeycomb Asset Management, managed by David Fiszel, created the largest position in eBay Inc (NASDAQ:EBAY). Honeycomb Asset Management had $52.5 million invested in the company at the end of the quarter. Michael Rockefeller and KarláKroeker's Woodline Partners also made a $48.4 million investment in the stock during the quarter. The following funds were also among the new EBAY investors: Anand Parekh's Alyeska Investment Group, Jeffrey Hoffner's Engle Capital, and Louis Bacon's Moore Global Investments.
Let's also examine hedge fund activity in other stocks similar to eBay Inc (NASDAQ:EBAY). These stocks are Centene Corporation (NYSE:CNC), FedEx Corporation (NYSE:FDX), L3Harris Technologies, Inc. (NYSE:LHX), Monster Beverage Corp (NASDAQ:MNST), General Motors Company (NYSE:GM), Exelon Corporation (NASDAQ:EXC), and Veeva Systems Inc (NYSE:VEEV). This group of stocks' market valuations match EBAY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNC,71,3079774,5 FDX,46,1254577,-4 LHX,50,1312574,7 MNST,35,1880728,-8 GM,69,4380069,16 EXC,30,772535,-3 VEEV,35,529727,2 Average,48,1887141,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 48 hedge funds with bullish positions and the average amount invested in these stocks was $1887 million. That figure was $5017 million in EBAY's case. Centene Corporation (NYSE:CNC) is the most popular stock in this table. On the other hand Exelon Corporation (NASDAQ:EXC) is the least popular one with only 30 bullish hedge fund positions. eBay Inc (NASDAQ:EBAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EBAY is 65.1. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th but still beat the market by 20.6 percentage points. Hedge funds were also right about betting on EBAY, though not to the same extent, as the stock returned 12.1% since the end of June and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.