Is eBay Inc (NASDAQ:EBAY) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
eBay Inc (NASDAQ:EBAY) was in 53 hedge funds' portfolios at the end of the third quarter of 2019. EBAY investors should pay attention to an increase in hedge fund interest recently. There were 47 hedge funds in our database with EBAY positions at the end of the previous quarter. Our calculations also showed that EBAY 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.
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' 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_26423" align="aligncenter" width="482"] Seth Klarman of Baupost Group[/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. Let's take a glance at the new hedge fund action regarding eBay Inc (NASDAQ:EBAY).
Hedge fund activity in eBay Inc (NASDAQ:EBAY)
At the end of the third quarter, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EBAY over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Baupost Group held the most valuable stake in eBay Inc (NASDAQ:EBAY), which was worth $648.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $444.9 million worth of shares. Elliott Management, AQR Capital Management, and Two Sigma Advisors 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 Bodenholm Capital allocated the biggest weight to eBay Inc (NASDAQ:EBAY), around 19.53% of its portfolio. Kingstown Capital Management is also relatively very bullish on the stock, setting aside 9.67 percent of its 13F equity portfolio to EBAY.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. Chiron Investment Management, managed by Ryan Caldwell, initiated the biggest position in eBay Inc (NASDAQ:EBAY). Chiron Investment Management had $18.5 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $14.8 million investment in the stock during the quarter. The other funds with brand new EBAY positions are Benjamin A. Smith's Laurion Capital Management, Minhua Zhang's Weld Capital Management, and Brandon Haley's Holocene Advisors.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as eBay Inc (NASDAQ:EBAY) but similarly valued. These stocks are The Hershey Company (NYSE:HSY), Autodesk, Inc. (NASDAQ:ADSK), China Unicom (Hong Kong) Limited (NYSE:CHU), and Shopify Inc (NYSE:SHOP). This group of stocks' market values resemble EBAY's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HSY,33,1103825,6 ADSK,45,2728142,-11 CHU,8,65922,2 SHOP,34,2509650,8 Average,30,1601885,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1602 million. That figure was $3488 million in EBAY's case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks eBay Inc (NASDAQ:EBAY) 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. Unfortunately EBAY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EBAY were disappointed as the stock returned -8.5% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.