How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Fiverr International Ltd. (NYSE:FVRR).
Fiverr International Ltd. (NYSE:FVRR) shareholders have witnessed an increase in hedge fund sentiment of late. Fiverr International Ltd. (NYSE:FVRR) was in 30 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FVRR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
To the average investor there are a lot of tools shareholders put to use to evaluate their holdings. Two of the most useful tools are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outperform their index-focused peers by a significant margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
David E. Shaw of D.E. Shaw
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Do Hedge Funds Think FVRR Is A Good Stock To Buy Now?
At the end of June, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the first quarter of 2020. By comparison, 21 hedge funds held shares or bullish call options in FVRR a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Fiverr International Ltd. (NYSE:FVRR) was held by SRS Investment Management, which reported holding $220.5 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $58.8 million position. Other investors bullish on the company included Zevenbergen Capital Investments, Brightlight Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Brightlight Capital allocated the biggest weight to Fiverr International Ltd. (NYSE:FVRR), around 13.51% of its 13F portfolio. Kent Lake Capital is also relatively very bullish on the stock, designating 4.64 percent of its 13F equity portfolio to FVRR.
As industrywide interest jumped, some big names were leading the bulls' herd. Hitchwood Capital Management, managed by James Crichton, initiated the biggest position in Fiverr International Ltd. (NYSE:FVRR). Hitchwood Capital Management had $8.5 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also initiated a $8.3 million position during the quarter. The other funds with new positions in the stock are Doron Breen and Mori Arkin's Sphera Global Healthcare Fund, Richard Walters II's Stony Point Capital, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's now take a look at hedge fund activity in other stocks similar to Fiverr International Ltd. (NYSE:FVRR). These stocks are WEX Inc (NYSE:WEX), Zions Bancorporation, National Association (NASDAQ:ZION), Ralph Lauren Corporation (NYSE:RL), Capri Holdings Limited (NYSE:CPRI), Jabil Inc. (NYSE:JBL), Ares Capital Corporation (NASDAQ:ARCC), and Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR). This group of stocks' market valuations are similar to FVRR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WEX,20,474265,-6 ZION,24,153157,0 RL,32,690613,-2 CPRI,44,891139,-3 JBL,26,513612,2 ARCC,12,86611,-3 ARWR,30,211148,10 Average,26.9,431506,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $432 million. That figure was $466 million in FVRR's case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand Ares Capital Corporation (NASDAQ:ARCC) is the least popular one with only 12 bullish hedge fund positions. Fiverr International Ltd. (NYSE:FVRR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FVRR is 66.1. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately FVRR wasn't nearly as popular as these 5 stocks and hedge funds that were betting on FVRR were disappointed as the stock returned -21.1% since the end of June (through 10/15) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.