Hedge Funds Are Crazy About Snap Inc. (SNAP)

·5 min read

Is Snap Inc. (NYSE:SNAP) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Snap Inc. (NYSE:SNAP) was in 78 hedge funds' portfolios at the end of September. The all time high for this statistic was previously 73. This means the bullish number of hedge fund positions in this stock currently sits at its new all time high. SNAP shareholders have witnessed an increase in support from the world's most elite money managers lately. There were 64 hedge funds in our database with SNAP holdings at the end of June. Our calculations also showed that SNAP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to take a look at the fresh hedge fund action regarding Snap Inc. (NYSE:SNAP).

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

Do Hedge Funds Think SNAP Is A Good Stock To Buy Now?

At third quarter's end, a total of 78 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards SNAP over the last 25 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey's hedge fund database, Lone Pine Capital has the number one position in Snap Inc. (NYSE:SNAP), worth close to $1.6723 billion, amounting to 5.6% of its total 13F portfolio. Coming in second is D. E. Shaw of D E Shaw, with a $662.3 million position; 0.6% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism contain Gabriel Plotkin's Melvin Capital Management, and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Hunt Lane Capital allocated the biggest weight to Snap Inc. (NYSE:SNAP), around 10.14% of its 13F portfolio. Dorsal Capital Management is also relatively very bullish on the stock, earmarking 9.3 percent of its 13F equity portfolio to SNAP.

Consequently, specific money managers were breaking ground themselves. Melvin Capital Management, managed by Gabriel Plotkin, created the most outsized call position in Snap Inc. (NYSE:SNAP). Melvin Capital Management had $369 million invested in the company at the end of the quarter. Panayotis Takis Sparaggis's Alkeon Capital Management also initiated a $221.6 million position during the quarter. The other funds with brand new SNAP positions are Rajiv Jain's GQG Partners, Leon Shaulov's Maplelane Capital, and Leon Shaulov's Maplelane Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Snap Inc. (NYSE:SNAP) but similarly valued. We will take a look at Applied Materials, Inc. (NASDAQ:AMAT), Pinduoduo Inc. (NASDAQ:PDD), General Electric Company (NYSE:GE), Diageo plc (NYSE:DEO), JD.Com Inc (NASDAQ:JD), CVS Health Corporation (NYSE:CVS), and Target Corporation (NYSE:TGT). This group of stocks' market caps are closest to SNAP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMAT,68,4320480,-5 PDD,49,3538156,0 GE,53,6244560,-14 DEO,18,703948,-2 JD,66,9057155,-10 CVS,61,1060624,-6 TGT,49,4349899,-17 Average,52,4182117,-7.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 52 hedge funds with bullish positions and the average amount invested in these stocks was $4182 million. That figure was $6739 million in SNAP's case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Snap Inc. (NYSE:SNAP) is more popular among hedge funds. Our overall hedge fund sentiment score for SNAP is 90. 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 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately SNAP wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SNAP were disappointed as the stock returned -35.5% since the end of the third quarter (through 11/30) 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 most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.

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