We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Tripadvisor Inc (NASDAQ:TRIP).
Is Tripadvisor Inc (NASDAQ:TRIP) a good stock to buy now? Prominent investors are betting on the stock. The number of long hedge fund positions moved up by 3 in recent months. Our calculations also showed that TRIP 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_30647" align="aligncenter" width="478"] Boykin Curry of Eagle Capital[/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 look at the latest hedge fund action surrounding Tripadvisor Inc (NASDAQ:TRIP).
How are hedge funds trading Tripadvisor Inc (NASDAQ:TRIP)?
Heading into the fourth quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TRIP over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Eagle Capital Management was the largest shareholder of Tripadvisor Inc (NASDAQ:TRIP), with a stake worth $345 million reported as of the end of September. Trailing Eagle Capital Management was Bares Capital Management, which amassed a stake valued at $172.2 million. AQR Capital Management, D E Shaw, and PAR Capital Management 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 Incline Global Management allocated the biggest weight to Tripadvisor Inc (NASDAQ:TRIP), around 6.17% of its portfolio. Bares Capital Management is also relatively very bullish on the stock, designating 5.17 percent of its 13F equity portfolio to TRIP.
Now, key money managers were breaking ground themselves. Incline Global Management, managed by Jeff Lignelli, initiated the largest position in Tripadvisor Inc (NASDAQ:TRIP). Incline Global Management had $28.9 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $12.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Charles Davidson and Joseph Jacobs's Wexford Capital, Brandon Haley's Holocene Advisors, and Ray Dalio's Bridgewater Associates.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Tripadvisor Inc (NASDAQ:TRIP) but similarly valued. These stocks are Flex Ltd. (NASDAQ:FLEX), Leggett & Platt, Inc. (NYSE:LEG), ITT Inc. (NYSE:ITT), and Pegasystems Inc. (NASDAQ:PEGA). All of these stocks' market caps are similar to TRIP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FLEX,31,1478106,-3 LEG,10,53164,1 ITT,20,516984,-5 PEGA,23,733352,-1 Average,21,695402,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $695 million. That figure was $1051 million in TRIP's case. Flex Ltd. (NASDAQ:FLEX) is the most popular stock in this table. On the other hand Leggett & Platt, Inc. (NYSE:LEG) is the least popular one with only 10 bullish hedge fund positions. Tripadvisor Inc (NASDAQ:TRIP) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TRIP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TRIP were disappointed as the stock returned -17.4% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.