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Hedge Fund Favorites vs. Electronic Arts Inc. (NASDAQ:EA) In 2019

Faizan Farooque

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 industries 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 Electronic Arts Inc. (NASDAQ:EA) and compare its performance to hedge funds' consensus picks in 2019.

Electronic Arts Inc. (NASDAQ:EA) investors should pay attention to an increase in hedge fund sentiment in recent months. EA was in 64 hedge funds' portfolios at the end of the third quarter of 2019. There were 59 hedge funds in our database with EA holdings at the end of the previous quarter. Our calculations also showed that EA 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).

In the eyes of most investors, hedge funds are viewed as underperforming, outdated financial tools of yesteryear. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the top tier of this group, approximately 750 funds. These investment experts command the lion's share of all hedge funds' total asset base, and by tailing their matchless investments, Insider Monkey has found various investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update.

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 gander at the fresh hedge fund action regarding Electronic Arts Inc. (NASDAQ:EA).

How are hedge funds trading Electronic Arts Inc. (NASDAQ:EA)?

At Q3's end, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards EA over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exist a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Electronic Arts Inc. (NASDAQ:EA), which was worth $272.7 million at the end of the third quarter. On the second spot was SRS Investment Management which amassed $191.7 million worth of shares. D E Shaw, Two Sigma Advisors, and SoMa Equity Partners 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, SoMa Equity Partners allocated the biggest weight to Electronic Arts Inc. (NASDAQ:EA), around 9.68% of its 13F portfolio. Alta Park Capital is also relatively very bullish on the stock, designating 9.02 percent of its 13F equity portfolio to EA.

Consequently, key money managers have been driving this bullishness. Suvretta Capital Management, managed by Aaron Cowen, created the largest position in Electronic Arts Inc. (NASDAQ:EA). Suvretta Capital Management had $82.5 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made an $18.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Caldwell's Chiron Investment Management, Stanley Druckenmiller's Duquesne Capital, and Dmitry Balyasny's Balyasny Asset Management.

Let's now review hedge fund activity in other stocks similar to Electronic Arts Inc. (NASDAQ:EA). We will take a look at Amphenol Corporation (NYSE:APH), Nutrien Ltd. (NYSE:NTR), Alcon Inc. (NYSE:ALC), and Canon Inc. (NYSE:CAJ). This group of stocks' market caps resembles EA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APH,31,758511,6 NTR,25,174521,3 ALC,22,482231,4 CAJ,8,95141,2 Average,21.5,377601,3.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $378 million. That figure was $2090 million in EA's case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Electronic Arts Inc. (NASDAQ:EA) 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. Hedge funds were also right about betting on EA, though not to the same extent, as the stock returned 36.6% during the same period and outperformed the market as well. 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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