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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards eBay Inc (NASDAQ:EBAY).
eBay Inc (NASDAQ:EBAY) has experienced a decrease in hedge fund sentiment in recent months. eBay Inc (NASDAQ:EBAY) was in 39 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 83. Our calculations also showed that EBAY isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Seth Klarman of Baupost Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. Now we're going to review the recent hedge fund action encompassing eBay Inc (NASDAQ:EBAY).
Do Hedge Funds Think EBAY Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EBAY over the last 24 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Seth Klarman's Baupost Group has the biggest position in eBay Inc (NASDAQ:EBAY), worth close to $1.0455 billion, accounting for 8.5% of its total 13F portfolio. Coming in second is Nicolai Tangen of Ako Capital, with a $505 million position; the fund has 5.7% of its 13F portfolio invested in the stock. Some other peers that hold long positions contain Richard Mashaal's Rima Senvest Management, Andrew Wellington and Jeff Keswin's Lyrical Asset Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Rima Senvest Management allocated the biggest weight to eBay Inc (NASDAQ:EBAY), around 12.01% of its 13F portfolio. Ivy Lane Capital is also relatively very bullish on the stock, designating 9.48 percent of its 13F equity portfolio to EBAY.
Judging by the fact that eBay Inc (NASDAQ:EBAY) has faced falling interest from the aggregate hedge fund industry, we can see that there were a few money managers that decided to sell off their full holdings by the end of the second quarter. Interestingly, Phill Gross and Robert Atchinson's Adage Capital Management dumped the biggest investment of the 750 funds watched by Insider Monkey, totaling close to $44.1 million in stock, and Michael Rockefeller and KarláKroeker's Woodline Partners was right behind this move, as the fund sold off about $40.9 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 12 funds by the end of the second quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as eBay Inc (NASDAQ:EBAY) but similarly valued. These stocks are Marvell Technology, Inc. (NASDAQ:MRVL), Vodafone Group Plc (NASDAQ:VOD), Veeva Systems Inc (NYSE:VEEV), Dow Inc. (NYSE:DOW), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), Bilibili Inc. (NASDAQ:BILI), and IQVIA Holdings, Inc. (NYSE:IQV). All of these stocks' market caps are similar to EBAY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRVL,51,1390237,18 VOD,17,703238,0 VEEV,44,1544061,5 DOW,40,518571,-1 SMFG,11,59990,-3 BILI,47,2001370,-6 IQV,69,3809269,7 Average,39.9,1432391,2.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.9 hedge funds with bullish positions and the average amount invested in these stocks was $1432 million. That figure was $3126 million in EBAY's case. IQVIA Holdings, Inc. (NYSE:IQV) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 11 bullish hedge fund positions. eBay Inc (NASDAQ:EBAY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EBAY is 31.2. 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 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on EBAY as the stock returned 6.4% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.