We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Equinix Inc (NASDAQ:EQIX).
Equinix Inc (NASDAQ:EQIX) investors should be aware of a decrease in enthusiasm from smart money in recent months. 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 at the end of this article 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_258236" align="alignnone" width="600"] Ken Griffin of Citadel Investment Group[/caption]
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. Keeping this in mind we're going to take a glance at the key hedge fund action regarding Equinix Inc (NASDAQ:EQIX).
How are hedge funds trading Equinix Inc (NASDAQ:EQIX)?
Heading into the fourth quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EQIX over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Panayotis Takis Sparaggis's Alkeon Capital Management has the number one position in Equinix Inc (NASDAQ:EQIX), worth close to $277.3 million, corresponding to 1% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $256.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Farallon Capital, Barry Lebovits and Joshua Kuntz's Rivulet Capital and Ricky Sandler's Eminence Capital. In terms of the portfolio weights assigned to each position Passport Capital allocated the biggest weight to Equinix Inc (NASDAQ:EQIX), around 22.17% of its 13F portfolio. Rivulet Capital is also relatively very bullish on the stock, earmarking 15.01 percent of its 13F equity portfolio to EQIX.
Seeing as Equinix Inc (NASDAQ:EQIX) has witnessed declining sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few hedge funds that elected to cut their entire stakes in the third quarter. It's worth mentioning that Brandon Haley's Holocene Advisors dumped the biggest stake of all the hedgies followed by Insider Monkey, valued at about $45.1 million in stock. Jeffrey Furber's fund, AEW Capital Management, also dumped its stock, about $44.4 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 5 funds in the third quarter.
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 Air Products & Chemicals, Inc. (NYSE:APD), Kimberly Clark Corporation (NYSE:KMB), Waste Management, Inc. (NYSE:WM), and American International Group Inc (NYSE:AIG). All of these stocks' market caps are closest to EQIX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APD,38,478746,6 KMB,40,1622264,0 WM,46,3533060,11 AIG,49,2451222,8 Average,43.25,2021323,6.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 43.25 hedge funds with bullish positions and the average amount invested in these stocks was $2021 million. That figure was $1581 million in EQIX's case. American International Group Inc (NYSE:AIG) is the most popular stock in this table. On the other hand Air Products & Chemicals, Inc. (NYSE:APD) is the least popular one with only 38 bullish hedge fund positions. Compared to these stocks Equinix Inc (NASDAQ:EQIX) is even less popular than APD. Hedge funds clearly dropped the ball on EQIX as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on EQIX as the stock returned 65.4% in 2019 (through December 23rd) and outperformed the market by an even larger margin. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.