We at Insider Monkey have gone over 752 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Paypal Holdings Inc (NASDAQ:PYPL) based on that data and compare it against similarly valued stocks.
Paypal Holdings Inc (NASDAQ:PYPL) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 95 hedge funds' portfolios at the end of September. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Honeywell International Inc. (NYSE:HON), Texas Instruments Incorporated (NASDAQ:TXN), and Philip Morris International Inc. (NYSE:PM) to gather more data points. Our calculations also showed that PYPL ranked 15th overall among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 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.
COATUE MANAGEMENT
We're going to view the latest hedge fund action regarding Paypal Holdings Inc (NASDAQ:PYPL).
How are hedge funds trading Paypal Holdings Inc (NASDAQ:PYPL)?
At Q3's end, a total of 95 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 97 hedge funds held shares or bullish call options in PYPL a year ago. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
PYPL_nov2019
Among these funds, Arrowstreet Capital held the most valuable stake in Paypal Holdings Inc (NASDAQ:PYPL), which was worth $467.7 million at the end of the second quarter. On the second spot was Fisher Asset Management which amassed $456.1 million worth of shares. Moreover, D E Shaw, Coatue Management, and Third Point were also bullish on Paypal Holdings Inc (NASDAQ:PYPL), allocating a large percentage of their portfolios to this stock. In terms of the portfolio weights assigned to each position Ogborne Capital allocated the biggest weight to Paypal Holdings Inc (NASDAQ:PYPL), around 15.5% of its portfolio. Marathon Partners is also relatively very bullish on the stock, setting aside 7.7 percent of its 13F equity portfolio to PYPL.
Since Paypal Holdings Inc (NASDAQ:PYPL) has experienced a decline in interest from the smart money, it's easy to see that there exists a select few funds that decided to sell off their entire stakes heading into Q3. Interestingly, Alex Sacerdote's Whale Rock Capital Management cut the biggest stake of the 750 funds followed by Insider Monkey, comprising an estimated $186.5 million in stock. Stanley Druckenmiller's fund, Duquesne Capital, also dropped its stock, about $55.1 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Paypal Holdings Inc (NASDAQ:PYPL). These stocks are Honeywell International Inc. (NYSE:HON), Texas Instruments Incorporated (NASDAQ:TXN), Philip Morris International Inc. (NYSE:PM), and United Technologies Corporation (NYSE:UTX). This group of stocks' market values match PYPL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HON,53,1926350,-3 TXN,52,2578705,9 PM,53,3693236,14 UTX,68,6458342,3 Average,56.5,3664158,5.75 [/table]
As you can see these stocks had an average of 56.5 hedge funds with bullish positions and the average amount invested in these stocks was $3664 million. That figure was $4136 million in PYPL's case. United Technologies Corporation (NYSE:UTX) is the most popular stock in this table. On the other hand Texas Instruments Incorporated (NASDAQ:TXN) is the least popular one with only 52 bullish hedge fund positions. Compared to these stocks Paypal Holdings Inc (NASDAQ:PYPL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 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 -1.8% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
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