We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article we look at what those investors think of Pinterest, Inc. (NYSE:PINS).
Is Pinterest, Inc. (NYSE:PINS) the right pick for your portfolio? Money managers are getting more bullish. The number of long hedge fund bets rose by 4 in recent months. Our calculations also showed that PINS isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_681361" align="aligncenter" width="399"] Glen Kacher of Light Street Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to go over the key hedge fund action surrounding Pinterest, Inc. (NYSE:PINS).
What have hedge funds been doing with Pinterest, Inc. (NYSE:PINS)?
Heading into the first quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PINS over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Light Street Capital held the most valuable stake in Pinterest, Inc. (NYSE:PINS), which was worth $94.1 million at the end of the third quarter. On the second spot was Eminence Capital which amassed $78.8 million worth of shares. SQN Investors, Valiant Capital, and Polar Capital 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 Empirical Capital Partners allocated the biggest weight to Pinterest, Inc. (NYSE:PINS), around 8.31% of its 13F portfolio. ThornTree Capital Partners is also relatively very bullish on the stock, earmarking 6.51 percent of its 13F equity portfolio to PINS.
As industrywide interest jumped, some big names were breaking ground themselves. Eminence Capital, managed by Ricky Sandler, created the most outsized position in Pinterest, Inc. (NYSE:PINS). Eminence Capital had $78.8 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $28.6 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny's Balyasny Asset Management, James Thomas Berylson's Berylson Capital Partners, and Tor Minesuk's Mondrian Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Pinterest, Inc. (NYSE:PINS) but similarly valued. We will take a look at NiSource Inc. (NYSE:NI), Trimble Inc. (NASDAQ:TRMB), CF Industries Holdings, Inc. (NYSE:CF), and Avantor, Inc. (NYSE:AVTR). This group of stocks' market values are closest to PINS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NI,28,726734,2 TRMB,30,649207,2 CF,41,1003526,-1 AVTR,28,833100,1 Average,31.75,803142,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $803 million. That figure was $514 million in PINS's case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand NiSource Inc. (NYSE:NI) is the least popular one with only 28 bullish hedge fund positions. Pinterest, Inc. (NYSE:PINS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately PINS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PINS were disappointed as the stock returned -37.6% during the same time period 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 many of these stocks already outperformed the market so far this year. 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.