Hedge Funds Keep Buying Square, Inc. (SQ)

·6 min read

The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Square, Inc. (NYSE:SQ).

Is Square, Inc. (NYSE:SQ) worth your attention right now? The best stock pickers were taking a bullish view. The number of long hedge fund positions increased by 3 recently. Square, Inc. (NYSE:SQ) was in 92 hedge funds' portfolios at the end of March. The all time high for this statistic was previously 89. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SQ ranked 26th among the 30 most popular stocks among hedge funds (click for Q1 rankings).

If you'd ask most market participants, hedge funds are perceived as slow, old investment vehicles of yesteryear. While there are more than 8000 funds in operation at present, Our experts choose to focus on the aristocrats of this club, approximately 850 funds. It is estimated that this group of investors have their hands on the lion's share of all hedge funds' total capital, and by paying attention to their highest performing investments, Insider Monkey has spotted numerous investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Aaron Cowen Suvretta Capital
Aaron Cowen Suvretta Capital

Aaron Cowen of Suvretta Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's analyze the key hedge fund action regarding Square, Inc. (NYSE:SQ).

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

At Q1's end, a total of 92 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the fourth quarter of 2020. On the other hand, there were a total of 56 hedge funds with a bullish position in SQ a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Square, Inc. (NYSE:SQ) was held by ARK Investment Management, which reported holding $2492.6 million worth of stock at the end of December. It was followed by Bares Capital Management with a $1122.4 million position. Other investors bullish on the company included Citadel Investment Group, Coatue Management, and Lone Pine Capital. In terms of the portfolio weights assigned to each position Bares Capital Management allocated the biggest weight to Square, Inc. (NYSE:SQ), around 20.99% of its 13F portfolio. ShawSpring Partners is also relatively very bullish on the stock, dishing out 16.2 percent of its 13F equity portfolio to SQ.

Now, key money managers have been driving this bullishness. Palestra Capital Management, managed by Andrew Immerman and Jeremy Schiffman, established the most valuable position in Square, Inc. (NYSE:SQ). Palestra Capital Management had $150.3 million invested in the company at the end of the quarter. Robert Pitts's Steadfast Capital Management also initiated a $106.2 million position during the quarter. The other funds with new positions in the stock are Aaron Cowen's Suvretta Capital Management, Steve Cohen's Point72 Asset Management, and Ravi Chopra's Azora Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Square, Inc. (NYSE:SQ) but similarly valued. These stocks are Uber Technologies, Inc. (NYSE:UBER), Target Corporation (NYSE:TGT), Micron Technology, Inc. (NASDAQ:MU), CVS Health Corporation (NYSE:CVS), ServiceNow Inc (NYSE:NOW), Diageo plc (NYSE:DEO), and Booking Holdings Inc. (NASDAQ:BKNG). All of these stocks' market caps match SQ's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBER,130,10532866,-5 TGT,60,4760942,-18 MU,100,7621579,0 CVS,62,1315655,6 NOW,98,6127672,2 DEO,22,724467,-1 BKNG,103,6810305,-5 Average,82.1,5413355,-3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 82.1 hedge funds with bullish positions and the average amount invested in these stocks was $5413 million. That figure was $9202 million in SQ's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 22 bullish hedge fund positions. Square, Inc. (NYSE:SQ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SQ is 70.4. 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 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately SQ wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SQ were disappointed as the stock returned -3.4% since the end of March (through 6/11) 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.

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