The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Paypal Holdings Inc (NASDAQ:PYPL) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is Paypal Holdings Inc (NASDAQ:PYPL) worth your attention right now? The best stock pickers were getting extremely bullish. The number of long hedge fund positions increased by 26 in recent months. Our calculations also showed that PYPL ranked 9th among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Paypal Holdings Inc (NASDAQ:PYPL) was in 144 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics was 126 previously. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 118 hedge funds in our database with PYPL positions at the end of March.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
COATUE MANAGEMENT
Philippe Laffont of Coatue Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out ideas like this under-the-radar stock to identify the next tenbagger. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we're going to take a peek at the key hedge fund action regarding Paypal Holdings Inc (NASDAQ:PYPL).
Hedge fund activity in Paypal Holdings Inc (NASDAQ:PYPL)
At the end of the second quarter, a total of 144 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PYPL over the last 20 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Ken Fisher's Fisher Asset Management has the most valuable position in Paypal Holdings Inc (NASDAQ:PYPL), worth close to $1.7 billion, amounting to 1.7% of its total 13F portfolio. The second most bullish fund manager is Lone Pine Capital, with a $1.2854 billion position; 6.5% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish comprise Philippe Laffont's Coatue Management, John Armitage's Egerton Capital Limited and Gabriel Plotkin's Melvin Capital Management. In terms of the portfolio weights assigned to each position Ogborne Capital allocated the biggest weight to Paypal Holdings Inc (NASDAQ:PYPL), around 18.1% of its 13F portfolio. Portland Hill Asset Management is also relatively very bullish on the stock, designating 16.61 percent of its 13F equity portfolio to PYPL.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Egerton Capital Limited, managed by John Armitage, established the most outsized position in Paypal Holdings Inc (NASDAQ:PYPL). Egerton Capital Limited had $649.6 million invested in the company at the end of the quarter. Rajiv Jain's GQG Partners also initiated a $456.7 million position during the quarter. The other funds with new positions in the stock are Robert Joseph Caruso's Select Equity Group, David Tepper's Appaloosa Management LP, and Josh Resnick's Jericho Capital Asset Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Paypal Holdings Inc (NASDAQ:PYPL) but similarly valued. We will take a look at ASML Holding N.V. (NASDAQ:ASML), Sanofi (NASDAQ:SNY), Accenture Plc (NYSE:ACN), Charter Communications, Inc. (NASDAQ:CHTR), International Business Machines Corp. (NYSE:IBM), Union Pacific Corporation (NYSE:UNP), and Tesla Inc. (NASDAQ:TSLA). 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 ASML,25,1961320,-5 SNY,24,1220415,9 ACN,44,1080127,-5 CHTR,96,11227561,-8 IBM,46,918051,5 UNP,68,3685933,5 TSLA,63,5560864,2 Average,52.3,3664896,0.4 [/table]
As you can see these stocks had an average of 52.3 hedge funds with bullish positions and the average amount invested in these stocks was $3.7 billion. That figure was $11.4 billion in PYPL's case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand Sanofi (NYSE:SNY) is the least popular one with only 24 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 28.2% in 2020 through August 24th but still managed to beat the market by 20.6 percentage points. Hedge funds were also right about betting on PYPL as the stock returned 14.1% since the end of June 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.
