We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Eventbrite, Inc. (NYSE:EB) and determine whether hedge funds skillfully traded this stock.
Eventbrite, Inc. (NYSE:EB) shareholders have witnessed a decrease in enthusiasm from smart money of late. Eventbrite, Inc. (NYSE:EB) was in 20 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 25. There were 25 hedge funds in our database with EB positions at the end of the first quarter. Our calculations also showed that EB isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Bruce Kovner of Caxton Associates LP
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind let's take a peek at the fresh hedge fund action regarding Eventbrite, Inc. (NYSE:EB).
Hedge fund activity in Eventbrite, Inc. (NYSE:EB)
At the end of June, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in EB a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cadian Capital was the largest shareholder of Eventbrite, Inc. (NYSE:EB), with a stake worth $49 million reported as of the end of September. Trailing Cadian Capital was Immersion Capital, which amassed a stake valued at $33.9 million. Parian Global Management, Atalan Capital, and Renaissance Technologies 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 Parian Global Management allocated the biggest weight to Eventbrite, Inc. (NYSE:EB), around 5.14% of its 13F portfolio. Immersion Capital is also relatively very bullish on the stock, setting aside 3.5 percent of its 13F equity portfolio to EB.
Seeing as Eventbrite, Inc. (NYSE:EB) has faced bearish sentiment from the smart money, it's easy to see that there was a specific group of hedgies that slashed their full holdings in the second quarter. Interestingly, Michael Pausic's Foxhaven Asset Management dumped the largest position of the 750 funds watched by Insider Monkey, valued at close to $30.9 million in stock. Greg Poole's fund, Echo Street Capital Management, also dropped its stock, about $9.8 million worth. These moves are interesting, as total hedge fund interest was cut by 5 funds in the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Eventbrite, Inc. (NYSE:EB) but similarly valued. We will take a look at Kite Realty Group Trust (NYSE:KRG), Purple Innovation, Inc. (NASDAQ:PRPL), Chase Corporation (NYSE:CCF), ATN International, Inc. (NASDAQ:ATNI), Renewable Energy Group Inc (NASDAQ:REGI), Tompkins Financial Corporation (NYSE:TMP), and Dynavax Technologies Corporation (NASDAQ:DVAX). This group of stocks' market values resemble EB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRG,10,42099,2 PRPL,28,359302,14 CCF,12,89293,2 ATNI,8,53962,0 REGI,21,83483,5 TMP,4,11436,0 DVAX,17,122509,9 Average,14.3,108869,4.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.3 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $162 million in EB's case. Purple Innovation, Inc. (NASDAQ:PRPL) is the most popular stock in this table. On the other hand Tompkins Financial Corporation (NYSE:TMP) is the least popular one with only 4 bullish hedge fund positions. Eventbrite, Inc. (NYSE:EB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EB is 24. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on EB as the stock returned 26.6% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.