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Hedge Funds Never Been Less Bullish On Electronic Arts Inc. (EA)

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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Electronic Arts Inc. (NASDAQ:EA).

Is Electronic Arts Inc. (NASDAQ:EA) a buy, sell, or hold? Hedge funds were in a bearish mood. The number of bullish hedge fund positions retreated by 6 in recent months. Electronic Arts Inc. (NASDAQ:EA) was in 44 hedge funds' portfolios at the end of March. The all time high for this statistic is 79. Our calculations also showed that EA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 50 hedge funds in our database with EA holdings at the end of December.

In the eyes of most shareholders, hedge funds are assumed to be worthless, old investment tools of years past. While there are more than 8000 funds trading at present, We look at the upper echelon of this group, around 850 funds. Most estimates calculate that this group of people shepherd most of the hedge fund industry's total asset base, and by watching their highest performing equity investments, Insider Monkey has discovered many investment strategies that have historically beaten the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 homepage. With all of this in mind let's analyze the fresh hedge fund action regarding Electronic Arts Inc. (NASDAQ:EA).

Do Hedge Funds Think EA Is A Good Stock To Buy Now?

At the end of March, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EA over the last 23 quarters. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is EA A Good Stock To Buy?
Is EA A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Electronic Arts Inc. (NASDAQ:EA), with a stake worth $233.5 million reported as of the end of March. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $180.7 million. AQR Capital Management, Alyeska Investment Group, 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 Franklin Street Capital allocated the biggest weight to Electronic Arts Inc. (NASDAQ:EA), around 2.95% of its 13F portfolio. Crescent Park Management is also relatively very bullish on the stock, earmarking 2.56 percent of its 13F equity portfolio to EA.

Since Electronic Arts Inc. (NASDAQ:EA) has faced bearish sentiment from the smart money, it's safe to say that there lies a certain "tier" of hedgies who were dropping their full holdings last quarter. At the top of the heap, Marcio Appel's Adam Capital dumped the biggest position of the 750 funds tracked by Insider Monkey, worth an estimated $28.5 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund said goodbye to about $11 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 6 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Electronic Arts Inc. (NASDAQ:EA). These stocks are Constellation Brands, Inc. (NYSE:STZ), Agilent Technologies Inc. (NYSE:A), Ferrari N.V. (NYSE:RACE), Cadence Design Systems Inc (NASDAQ:CDNS), Schlumberger Limited. (NYSE:SLB), Cummins Inc. (NYSE:CMI), and Travelers Companies Inc (NYSE:TRV). This group of stocks' market values are closest to EA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STZ,58,1231651,0 A,42,3464139,-3 RACE,26,1257227,-3 CDNS,30,1490527,-2 SLB,50,1141533,0 CMI,37,817545,-8 TRV,35,409418,1 Average,39.7,1401720,-2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.7 hedge funds with bullish positions and the average amount invested in these stocks was $1402 million. That figure was $1430 million in EA's case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Ferrari N.V. (NYSE:RACE) is the least popular one with only 26 bullish hedge fund positions. Electronic Arts Inc. (NASDAQ:EA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EA is 43.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately EA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on EA were disappointed as the stock returned 4.4% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.