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Were Hedge Funds Right About Match Group, Inc. (MTCH)?

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Is Match Group, Inc. (NASDAQ:MTCH) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Match Group, Inc. (NASDAQ:MTCH) investors should pay attention to a decrease in support from the world's most elite money managers in recent months. Match Group, Inc. (NASDAQ:MTCH) was in 68 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 72. There were 72 hedge funds in our database with MTCH positions at the end of the fourth quarter. Our calculations also showed that MTCH isn't among the 30 most popular stocks among hedge funds (click for Q1 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 115 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.


Louis Bacon Moore of Moore Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. With all of this in mind we're going to analyze the fresh hedge fund action surrounding Match Group, Inc. (NASDAQ:MTCH).

Do Hedge Funds Think MTCH Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 68 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MTCH over the last 23 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Lone Pine Capital has the biggest position in Match Group, Inc. (NASDAQ:MTCH), worth close to $852.4 million, amounting to 3.1% of its total 13F portfolio. The second most bullish fund manager is Viking Global, managed by Andreas Halvorsen, which holds a $279.5 million position; 0.8% of its 13F portfolio is allocated to the company. Some other peers that hold long positions comprise John Armitage's Egerton Capital Limited, Ken Griffin's Citadel Investment Group and Robert Pitts's Steadfast Capital Management. In terms of the portfolio weights assigned to each position ShawSpring Partners allocated the biggest weight to Match Group, Inc. (NASDAQ:MTCH), around 11.22% of its 13F portfolio. Six Columns Capital is also relatively very bullish on the stock, designating 5.87 percent of its 13F equity portfolio to MTCH.

Judging by the fact that Match Group, Inc. (NASDAQ:MTCH) has experienced falling interest from the smart money, it's safe to say that there exists a select few fund managers who were dropping their positions entirely by the end of the first quarter. It's worth mentioning that Alex Sacerdote's Whale Rock Capital Management sold off the biggest stake of the "upper crust" of funds tracked by Insider Monkey, comprising about $370.7 million in stock, and Gabriel Plotkin's Melvin Capital Management was right behind this move, as the fund sold off about $170.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 4 funds by the end of the first quarter.

Let's also examine hedge fund activity in other stocks similar to Match Group, Inc. (NASDAQ:MTCH). These stocks are Southwest Airlines Co. (NYSE:LUV), Prudential Financial Inc (NYSE:PRU), Roblox Corporation (NYSE:RBLX), Cintas Corporation (NASDAQ:CTAS), Xcel Energy Inc (NASDAQ:XEL), Lufax Holding Ltd (NYSE:LU), and Phillips 66 (NYSE:PSX). This group of stocks' market values are closest to MTCH's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LUV,52,747041,-3 PRU,37,634521,1 RBLX,46,3387779,46 CTAS,32,582628,-4 XEL,18,200349,-10 LU,9,208197,-2 PSX,24,290593,-2 Average,31.1,864444,3.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $864 million. That figure was $2938 million in MTCH's case. Southwest Airlines Co. (NYSE:LUV) is the most popular stock in this table. On the other hand Lufax Holding Ltd (NYSE:LU) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Match Group, Inc. (NASDAQ:MTCH) is more popular among hedge funds. Our overall hedge fund sentiment score for MTCH is 79.3. 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 25.8% in 2021 through August 6th and still beat the market by 6.7 percentage points. Unfortunately MTCH wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MTCH were disappointed as the stock returned 6.1% since the end of the first quarter (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.