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Hedge Fund Consensus Stocks vs. Twitter Inc (TWTR) In 2019

Debasis Saha

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Twitter Inc (NYSE:TWTR) and compare its performance to hedge funds' consensus picks in 2019.

Is Twitter Inc (NYSE:TWTR) a buy, sell, or hold? Prominent investors are becoming hopeful. The number of long hedge fund positions improved by 3 lately. Our calculations also showed that TWTR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). TWTR was in 50 hedge funds' portfolios at the end of the third quarter of 2019. There were 47 hedge funds in our database with TWTR holdings at the end of the previous quarter.

To the average investor there are many metrics shareholders employ to size up publicly traded companies. A pair of the most underrated metrics are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best investment managers can trounce the market by a significant margin (see the details here).

[caption id="attachment_30621" align="alignnone" width="600"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to view the latest hedge fund action regarding Twitter Inc (NYSE:TWTR).

How are hedge funds trading Twitter Inc (NYSE:TWTR)?

At Q3's end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TWTR over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TWTR A Good Stock To Buy?

Among these funds, AQR Capital Management held the most valuable stake in Twitter Inc (NYSE:TWTR), which was worth $438.9 million at the end of the third quarter. On the second spot was D E Shaw which amassed $340.5 million worth of shares. Renaissance Technologies, SRS Investment Management, and Citadel Investment Group 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 ThornTree Capital Partners allocated the biggest weight to Twitter Inc (NYSE:TWTR), around 8.07% of its 13F portfolio. Empirical Capital Partners is also relatively very bullish on the stock, dishing out 7.91 percent of its 13F equity portfolio to TWTR.

Now, specific money managers have been driving this bullishness. Coatue Management, managed by Philippe Laffont, assembled the most valuable position in Twitter Inc (NYSE:TWTR). Coatue Management had $133.6 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $44.5 million position during the quarter. The other funds with new positions in the stock are Gregg Moskowitz's Interval Partners, Benjamin A. Smith's Laurion Capital Management, and Cristan Blackman's Empirical Capital Partners.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Twitter Inc (NYSE:TWTR) but similarly valued. These stocks are Barclays PLC (NYSE:BCS), Canadian Natural Resources Limited (NYSE:CNQ), Monster Beverage Corp (NASDAQ:MNST), and Tyson Foods, Inc. (NYSE:TSN). This group of stocks' market valuations are closest to TWTR's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BCS,15,131768,3 CNQ,32,558227,8 MNST,34,2641322,-4 TSN,48,1716693,9 Average,32.25,1262003,4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1262 million. That figure was $2253 million in TWTR's case. Tyson Foods, Inc. (NYSE:TSN) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Twitter Inc (NYSE:TWTR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately TWTR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TWTR were disappointed as the stock returned 12.8% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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