Is Equinix Inc (NASDAQ:EQIX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is EQIX a good stock to buy now? Prominent investors were reducing their bets on the stock. The number of bullish hedge fund positions were trimmed by 7 in recent months. Equinix Inc (NASDAQ:EQIX) was in 42 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 55. Our calculations also showed that EQIX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 49 hedge funds in our database with EQIX positions at the end of the second quarter.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. You can subscribe to our free daily newsletter on our website. Now let's analyze the recent hedge fund action surrounding Equinix Inc (NASDAQ:EQIX).
Do Hedge Funds Think EQIX Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 40 hedge funds held shares or bullish call options in EQIX a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GQG Partners was the largest shareholder of Equinix Inc (NASDAQ:EQIX), with a stake worth $996.6 million reported as of the end of September. Trailing GQG Partners was Alkeon Capital Management, which amassed a stake valued at $351.3 million. Impax Asset Management, Farallon Capital, and D E Shaw 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 Tensile Capital allocated the biggest weight to Equinix Inc (NASDAQ:EQIX), around 7.69% of its 13F portfolio. EMS Capital is also relatively very bullish on the stock, dishing out 6.87 percent of its 13F equity portfolio to EQIX.
Because Equinix Inc (NASDAQ:EQIX) has experienced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few money managers that slashed their full holdings heading into Q4. At the top of the heap, Stuart J. Zimmer's Zimmer Partners dropped the largest investment of the "upper crust" of funds monitored by Insider Monkey, comprising close to $171.8 million in stock, and Sharlyn C. Heslam's Stockbridge Partners was right behind this move, as the fund dumped about $75 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Equinix Inc (NASDAQ:EQIX) but similarly valued. These stocks are The TJX Companies, Inc. (NYSE:TJX), Dominion Energy Inc. (NYSE:D), Colgate-Palmolive Company (NYSE:CL), FedEx Corporation (NYSE:FDX), Air Products & Chemicals, Inc. (NYSE:APD), Duke Energy Corporation (NYSE:DUK), and Uber Technologies, Inc. (NYSE:UBER). All of these stocks' market caps match EQIX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TJX,78,2853294,6 D,37,967030,4 CL,47,1540716,-3 FDX,71,2579950,25 APD,49,745333,12 DUK,36,756631,3 UBER,100,5978770,6 Average,59.7,2203103,7.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 59.7 hedge funds with bullish positions and the average amount invested in these stocks was $2203 million. That figure was $2270 million in EQIX's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 36 bullish hedge fund positions. Equinix Inc (NASDAQ:EQIX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EQIX is 25.6. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately EQIX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EQIX investors were disappointed as the stock returned -8.2% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.