Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, 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 15 S&P 500 stocks among hedge funds at the end of December 2018 yielded an average return of 19.7% year-to-date, vs. a gain of 13.1% for the S&P 500 Index. 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 Square, Inc. (NYSE:SQ).
Is Square, Inc. (NYSE:SQ) a buy here? The smart money is in a bullish mood. The number of bullish hedge fund positions inched up by 12 lately. Our calculations also showed that SQ isn't among the 30 most popular stocks among hedge funds. SQ was in 35 hedge funds' portfolios at the end of December. There were 23 hedge funds in our database with SQ holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's take a peek at the latest hedge fund action surrounding Square, Inc. (NYSE:SQ).
Hedge fund activity in Square, Inc. (NYSE:SQ)
At Q4's end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 52% from the second quarter of 2018. On the other hand, there were a total of 31 hedge funds with a bullish position in SQ a year ago. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Square, Inc. (NYSE:SQ) was held by D E Shaw, which reported holding $125.1 million worth of stock at the end of September. It was followed by Matrix Capital Management with a $117.8 million position. Other investors bullish on the company included Citadel Investment Group, Whale Rock Capital Management, and Renaissance Technologies.