Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Social Capital Hedosophia Holdings Corp. (NYSE:IPOA).
Is Social Capital Hedosophia Holdings Corp. (NYSE:IPOA) the right investment to pursue these days? Investors who are in the know are becoming more confident. The number of long hedge fund bets went up by 1 in recent months. Our calculations also showed that IPOA isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to go over the new hedge fund action encompassing Social Capital Hedosophia Holdings Corp. (NYSE:IPOA).
What does smart money think about Social Capital Hedosophia Holdings Corp. (NYSE:IPOA)?
Heading into the second quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in IPOA a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Social Capital Hedosophia Holdings Corp. (NYSE:IPOA) was held by Arrowgrass Capital Partners, which reported holding $45.9 million worth of stock at the end of March. It was followed by Governors Lane with a $30.6 million position. Other investors bullish on the company included Vertex One Asset Management, Angelo Gordon & Co, and Park West Asset Management.
As industrywide interest jumped, specific money managers have been driving this bullishness. Key Square Capital Management, managed by Scott Bessent, assembled the largest position in Social Capital Hedosophia Holdings Corp. (NYSE:IPOA). Key Square Capital Management had $3.6 million invested in the company at the end of the quarter. Andrew Weiss's Weiss Asset Management also initiated a $3.3 million position during the quarter. The other funds with brand new IPOA positions are John Thiessen's Vertex One Asset Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's now take a look at hedge fund activity in other stocks similar to Social Capital Hedosophia Holdings Corp. (NYSE:IPOA). These stocks are Qiwi PLC (NASDAQ:QIWI), Changyou.Com Ltd (NASDAQ:CYOU), MacroGenics Inc (NASDAQ:MGNX), and Wesco Aircraft Holdings Inc (NYSE:WAIR). All of these stocks' market caps are closest to IPOA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QIWI,12,77832,4 CYOU,11,47035,4 MGNX,23,139857,5 WAIR,22,195494,5 Average,17,115055,4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $283 million in IPOA's case. MacroGenics Inc (NASDAQ:MGNX) is the most popular stock in this table. On the other hand Changyou.Com Ltd (NASDAQ:CYOU) is the least popular one with only 11 bullish hedge fund positions. Social Capital Hedosophia Holdings Corp. (NYSE:IPOA) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately IPOA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on IPOA were disappointed as the stock returned 1.9% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.