Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Paypal Holdings Inc (NASDAQ:PYPL)? The smart money sentiment can provide an answer to this question.
Paypal Holdings Inc (NASDAQ:PYPL) was in 150 hedge funds' portfolios at the end of September. The all time high for this statistics prior to this quarter was 144. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 144 hedge funds in our database with PYPL positions at the end of the second quarter. Our calculations also showed that PYPL currently ranks 8th among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare PYPL against similarly valued stocks like Intel Corporation (NASDAQ:INTC), The Coca-Cola Company (NYSE:KO), Comcast Corporation (NASDAQ:CMCSA), and Merck & Co., Inc. (NYSE:MRK).
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are a lot of gauges shareholders employ to grade publicly traded companies. Some of the less utilized gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform their index-focused peers by a solid margin (see the details here).
Philippe Laffont of Coatue Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla's stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we're going to check out the latest hedge fund action surrounding Paypal Holdings Inc (NASDAQ:PYPL).
How have hedgies been trading Paypal Holdings Inc (NASDAQ:PYPL)?
At Q3's end, a total of 150 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. By comparison, 104 hedge funds held shares or bullish call options in PYPL a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Paypal Holdings Inc (NASDAQ:PYPL), with a stake worth $1993.9 million reported as of the end of September. Trailing Fisher Asset Management was Coatue Management, which amassed a stake valued at $1335.2 million. Lone Pine Capital, Egerton Capital Limited, and Tiger Global Management LLC 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 Portland Hill Asset Management allocated the biggest weight to Paypal Holdings Inc (NASDAQ:PYPL), around 16.16% of its 13F portfolio. Ogborne Capital is also relatively very bullish on the stock, setting aside 12.55 percent of its 13F equity portfolio to PYPL.
Now, key hedge funds were leading the bulls' herd. Maplelane Capital, managed by Leon Shaulov, assembled the biggest position in Paypal Holdings Inc (NASDAQ:PYPL). Maplelane Capital had $42 million invested in the company at the end of the quarter. Renaissance Technologies also made a $34.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management, David Fiszel's Honeycomb Asset Management, and Christopher Weldon's Stamina Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Paypal Holdings Inc (NASDAQ:PYPL). These stocks are salesforce.com, inc. (NYSE:CRM), The Walt Disney Company (NYSE:DIS), Netflix, Inc. (NASDAQ:NFLX), Intel Corporation (NASDAQ:INTC), The Coca-Cola Company (NYSE:KO), Comcast Corporation (NASDAQ:CMCSA), and Merck & Co., Inc. (NYSE:MRK). This group of stocks' market valuations resemble PYPL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRM,106,11087534,-1 DIS,112,8983570,7 NFLX,104,12878421,-9 INTC,66,4342499,-12 KO,60,22014756,1 CMCSA,82,8148816,2 MRK,80,6363637,4 Average,87.1,10545605,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 87.1 hedge funds with bullish positions and the average amount invested in these stocks was $10546 million. That figure was $11477 million in PYPL's case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand The Coca-Cola Company (NYSE:KO) is the least popular one with only 60 bullish hedge fund positions. Compared to these stocks Paypal Holdings Inc (NASDAQ:PYPL) is more popular among hedge funds. Our overall hedge fund sentiment score for PYPL is 96.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. Unfortunately PYPL wasn't nearly as successful as these 20 stocks and hedge funds that were betting on PYPL were disappointed as the stock returned 1.9% since the end of the third quarter (through 11/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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