We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 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 Eventbrite, Inc. (NYSE:EB).
Eventbrite, Inc. (NYSE:EB) has seen an increase in hedge fund interest of late. Our calculations also showed that EB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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_690797" align="aligncenter" width="473"] Sahm Adrangi of Kerrisdale Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to check out the key hedge fund action encompassing Eventbrite, Inc. (NYSE:EB).
How have hedgies been trading Eventbrite, Inc. (NYSE:EB)?
At Q3's end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in EB a year ago. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in Eventbrite, Inc. (NYSE:EB) was held by Foxhaven Asset Management, which reported holding $77.1 million worth of stock at the end of September. It was followed by Immersion Capital with a $70 million position. Other investors bullish on the company included Miller Value Partners, Cadian Capital, and Parian Global Management. In terms of the portfolio weights assigned to each position Immersion Capital allocated the biggest weight to Eventbrite, Inc. (NYSE:EB), around 11.09% of its 13F portfolio. Parian Global Management is also relatively very bullish on the stock, designating 5.94 percent of its 13F equity portfolio to EB.
Now, some big names have been driving this bullishness. Cadian Capital, managed by Eric Bannasch, established the largest position in Eventbrite, Inc. (NYSE:EB). Cadian Capital had $27.2 million invested in the company at the end of the quarter. Sahm Adrangi's Kerrisdale Capital also made a $3.5 million investment in the stock during the quarter. The following funds were also among the new EB investors: Renaissance Technologies, Zachary Miller's Parian Global Management, and Ravee Mehta's Nishkama Capital.
Let's also examine hedge fund activity in other stocks similar to Eventbrite, Inc. (NYSE:EB). We will take a look at Suburban Propane Partners LP (NYSE:SPH), Inspire Medical Systems, Inc. (NYSE:INSP), Rambus Inc. (NASDAQ:RMBS), and Tri Continental Corporation (NYSE:TY). This group of stocks' market valuations are closest to EB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPH,4,83169,0 INSP,18,288277,-1 RMBS,22,153424,6 TY,1,1233,0 Average,11.25,131526,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $132 million. That figure was $267 million in EB's case. Rambus Inc. (NASDAQ:RMBS) is the most popular stock in this table. On the other hand Tri Continental Corporation (NYSE:TY) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Eventbrite, Inc. (NYSE:EB) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on EB as the stock returned 21.5% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.