Were Hedge Funds Right About Amazon.com, Inc.?

Stocks, especially the once high-flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Amazon.com, Inc. at the end of the third quarter and determine whether the smart money was really smart about this stock.

Amazon.com, Inc. (Nasdaq: AMZN) has experienced a decrease in enthusiasm from smart money of late. Amazon.com, Inc. was in 242 hedge funds’ portfolios at the end of the third quarter of 2021. The all-time high for this statistic is 273. There were 271 hedge funds in our database with AMZN positions at the end of the second quarter. Our calculations also showed that AMZN ranked #3 among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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

Heading into the fourth quarter of 2021, a total of 242 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AMZN over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Amazon.com, Inc. was held by Citadel Investment Group, which reported holding $12855 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $6343.9 million position. Other investors bullish on the company included Eagle Capital Management, Tiger Global Management LLC, and Berkshire Hathaway. In terms of the portfolio weights assigned to each position, Skye Global Management allocated the biggest weight to Amazon.com, Inc., around 27.18% of its 13F portfolio. VGI Partners is also relatively very bullish on the stock, earmarking 26.95 percent of its 13F equity portfolio to AMZN.

Because Amazon.com, Inc. has experienced falling interest from hedge fund managers, it’s safe to say that there were a few fund managers that decided to sell off their positions entirely by the end of the third quarter. It’s worth mentioning that Masayoshi Son’s SB Management dropped the largest investment of all the hedgies monitored by Insider Monkey, worth an estimated $5653.3 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $896.7 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 29 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Amazon.com, Inc. but similarly valued. We will take a look at Meta Platforms, Inc. (Nasdaq: FB), Tesla Inc. (Nasdaq: TSLA), Berkshire Hathaway Inc. (NYSE: BRK-B), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), NVIDIA Corporation (Nasdaq: NVDA), JPMorgan Chase & Co. (NYSE: JPM), and Visa Inc (NYSE: V). All of these stocks’ market caps resemble AMZN’s market cap.

As you can see these stocks had an average of 115.4 hedge funds with bullish positions and the average amount invested in these stocks was $17149 million. That figure was $42553 million in AMZN’s case. Meta Platforms, Inc. (Nasdaq: FB) is the most popular stock in this table. On the other hand, Tesla Inc. (Nasdaq: TSLA) is the least popular one with only 60 bullish hedge fund positions. Amazon.com, Inc. (Nasdaq: AMZN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMZN is 95.6. Stocks with a 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, AMZN wasn’t nearly as successful as these 5 stocks and hedge funds that were betting on AMZN were disappointed as the stock returned -8.9% since the end of September (through 1/31) and underperformed the market. 

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