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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Pinterest, Inc. (NYSE:PINS) changed recently.
Is Pinterest (PINS) stock a buy or sell? Prominent investors were taking an optimistic view. The number of long hedge fund positions improved by 15 lately. Pinterest, Inc. (NYSE:PINS) was in 95 hedge funds' portfolios at the end of December. The all time high for this statistic was previously 80. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PINS ranked 27th among the 30 most popular stocks among hedge funds (click for Q4 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 124 percentage points since March 2017 (see the details here).
Alex Sacerdote of Whale Rock Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article). With all of this in mind we're going to analyze the new hedge fund action surrounding Pinterest, Inc. (NYSE:PINS).
Do Hedge Funds Think PINS Is A Good Stock To Buy Now?
At Q4's end, a total of 95 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the third quarter of 2020. On the other hand, there were a total of 37 hedge funds with a bullish position in PINS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Pinterest, Inc. (NYSE:PINS) was held by Alkeon Capital Management, which reported holding $668 million worth of stock at the end of December. It was followed by Melvin Capital Management with a $570.6 million position. Other investors bullish on the company included Whale Rock Capital Management, ARK Investment Management, and D E Shaw. In terms of the portfolio weights assigned to each position Half Sky Capital allocated the biggest weight to Pinterest, Inc. (NYSE:PINS), around 23.29% of its 13F portfolio. Empirical Capital Partners is also relatively very bullish on the stock, setting aside 16.48 percent of its 13F equity portfolio to PINS.
Now, key money managers have jumped into Pinterest, Inc. (NYSE:PINS) headfirst. Renaissance Technologies, established the largest position in Pinterest, Inc. (NYSE:PINS). Renaissance Technologies had $212.7 million invested in the company at the end of the quarter. Rajiv Jain's GQG Partners also initiated a $93.9 million position during the quarter. The other funds with brand new PINS positions are Gaurav Kapadia's XN Exponent Advisors, Li Ran's Half Sky Capital, and Geraldine McManus and Andrew Walter's Granger Management.
Let's also examine hedge fund activity in other stocks similar to Pinterest, Inc. (NYSE:PINS). These stocks are Thomson Reuters Corporation (NYSE:TRI), Barrick Gold Corporation (NYSE:GOLD), Public Storage (NYSE:PSA), Match Group, Inc. (NASDAQ:MTCH), Rocket Companies, Inc. (NYSE:RKT), TE Connectivity Ltd. (NYSE:TEL), and KLA Corporation (NASDAQ:KLAC). This group of stocks' market valuations resemble PINS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRI,23,360755,4 GOLD,53,1751874,1 PSA,31,1038430,14 MTCH,72,3780895,11 RKT,16,222897,-6 TEL,39,2164724,6 KLAC,36,925910,3 Average,38.6,1463641,4.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $1464 million. That figure was $5840 million in PINS's case. Match Group, Inc. (NASDAQ:MTCH) is the most popular stock in this table. On the other hand Rocket Companies, Inc. (NYSE:RKT) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Pinterest, Inc. (NYSE:PINS) is more popular among hedge funds. Our overall hedge fund sentiment score for PINS is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on PINS as the stock returned 10.8% since the end of December (through 3/19) 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.
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Disclosure: None. This article was originally published at Insider Monkey.