Amazon.com, Inc. (AMZN): Were Hedge Funds Right About Going Nuts?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&amp;P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Amazon.com, Inc. (NASDAQ:AMZN) heading into the second quarter and whether they were right about the stock.” data-reactid=”12″>We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Amazon.com, Inc. (NASDAQ:AMZN) heading into the second quarter and whether they were right about the stock.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Amazon.com, Inc. (NASDAQ:AMZN) shareholders have witnessed a gigantic increase in hedge fund interest lately. AMZN was in 251 hedge funds’ portfolios at the end of the first quarter of 2020. There were 202 hedge funds in our database with AMZN positions at the end of 2019. Our calculations also showed that AMZN ranked #1 among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.” data-reactid=”13″>Amazon.com, Inc. (NASDAQ:AMZN) shareholders have witnessed a gigantic increase in hedge fund interest lately. AMZN was in 251 hedge funds’ portfolios at the end of the first quarter of 2020. There were 202 hedge funds in our database with AMZN positions at the end of 2019. Our calculations also showed that AMZN ranked #1 among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&amp;P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.” data-reactid=”15″>So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Eric Mandelblatt of Soroban Capital Partners

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities&nbsp;like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when S&amp;P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors.&nbsp;Now let’s view the new hedge fund action surrounding Amazon.com, Inc. (NASDAQ:AMZN).” data-reactid=”28″>At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the new hedge fund action surrounding Amazon.com, Inc. (NASDAQ:AMZN).

What have hedge funds been doing with Amazon.com, Inc. (NASDAQ:AMZN)?

At Q1’s end, a total of 251 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AMZN over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

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