Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Snap Inc. (NYSE:SNAP) based on that data and determine whether they were really smart about the stock.
Snap Inc. (NYSE:SNAP) investors should pay attention to an increase in activity from the world's largest hedge funds lately. Snap Inc. (NYSE:SNAP) was in 49 hedge funds' portfolios at the end of June. There were 48 hedge funds in our database with SNAP positions at the end of the first quarter. Our calculations also showed that SNAP 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ryan Frick of Dorsal Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let's take a glance at the key hedge fund action surrounding Snap Inc. (NYSE:SNAP).
How have hedgies been trading Snap Inc. (NYSE:SNAP)?
At the end of June, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. On the other hand, there were a total of 45 hedge funds with a bullish position in SNAP a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies, holds the most valuable position in Snap Inc. (NYSE:SNAP). Renaissance Technologies has a $209.1 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is D E Shaw, managed by D. E. Shaw, which holds a $193.7 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining peers that are bullish consist of Robert Pohly's Samlyn Capital, and Ryan Frick and Oliver Evans's Dorsal Capital Management. In terms of the portfolio weights assigned to each position Dorsal Capital Management allocated the biggest weight to Snap Inc. (NYSE:SNAP), around 9.51% of its 13F portfolio. EMS Capital is also relatively very bullish on the stock, designating 8.73 percent of its 13F equity portfolio to SNAP.
Consequently, specific money managers have been driving this bullishness. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the most outsized position in Snap Inc. (NYSE:SNAP). Polar Capital had $85.8 million invested in the company at the end of the quarter. James Crichton's Hitchwood Capital Management also initiated a $54.8 million position during the quarter. The other funds with brand new SNAP positions are Alexander Mitchell's Scopus Asset Management, Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali's Alta Park Capital, and James Parsons's Junto Capital Management.
Let's now review hedge fund activity in other stocks similar to Snap Inc. (NYSE:SNAP). We will take a look at The Bank of New York Mellon Corporation (NYSE:BK), Bank of Montreal (NYSE:BMO), Constellation Brands, Inc. (NYSE:STZ), Thomson Reuters Corporation (NYSE:TRI), Banco Bradesco SA (NYSE:BBD), Public Storage (NYSE:PSA), and SBA Communications Corporation (NASDAQ:SBAC). This group of stocks' market valuations are closest to SNAP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BK,48,4431288,-4 BMO,13,107019,0 STZ,53,1653433,3 TRI,25,440519,3 BBD,18,235952,3 PSA,26,712541,-1 SBAC,57,2165651,11 Average,34.3,1392343,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $1392 million. That figure was $1602 million in SNAP's case. SBA Communications Corporation (NASDAQ:SBAC) is the most popular stock in this table. On the other hand Bank of Montreal (NYSE:BMO) is the least popular one with only 13 bullish hedge fund positions. Snap Inc. (NYSE:SNAP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNAP is 74.1. 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. 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 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately SNAP wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SNAP were disappointed as the stock returned -3.8% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.