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The Official Blog of WhaleWisdom.com

PayPal Holdings Inc. (PYPL) shares have soared over the past two years climbing by 113.5 percent since the end of 2015. However, during the fourth-quarter of 2017 institutions and hedge funds were aggressively reducing their stakes in the online payment processor. Shares of the stock have climbed by only five percent so far in 2018, about five percentage point better than the S&P 500.

PayPal was added to the WhaleWisdom WhaleIndex Portfolio on February 16, 2016 and has been among one of the best performers in the WhaleIndex. However, eBay Inc. (EBAY) recently announced PayPal would no longer be its main payment processor starting in 2020, and that caused shares of PayPal to plunge 10 percent off its all-time highs.

Institutions Dump Shares

During the fourth quarter, 237 new institutions started new positions, while 415 added to existing positions. However, only 55 institutions closed out their position entirely, 508 institutions reduced their holdings. In fact, the total number of aggregate 13F shares on December 31, fell by 1.35 percent to 970.97 million shares from 984.26 million at the end of the third quarter.

Analyst Remain Bullish

Institutions reducing their stakes comes as a surprise because analysts have remained extremely bullish. In fact, the average analysts price target on the stock is currently $84.85, according to Ycharts, nearly 10 percent higher than the stock’s current price of $77.27. Analysts have also been upping their earnings estimates for 2018 slightly climbing to $2.29 from $2.26 per share, an increase of 1.3 percent, while trimming revenue estimates slightly to $15.24 billion, down from $15.36 billion, a decline about 1 percent.

Technically Weak

Technically, the shares of PayPal look weak and have been trending lower since peaking in mid-January. The stock has broken a multi-month uptrend that has been in place since June of 2016. With that uptrend now broken, shares are at risk of falling even further, and it may be a sign that institutional selling is continuing to take place.

Results Coming

The company is expected to report results on April 26, and analysts are looking for earnings to climb by 22.5 percent to $0.54 per share, while revenue is seen climbing by 20.6 percent to $3.589 billion when it reports first-quarter results.

It will be interesting to see how the upcoming quarterly results turn out and whether it will be the analysts or the institutions that got PayPal right. As of right now, one thing is clear, the analysts are bulls, while the institutions are the bears. However, that may all change by the end of April.

Institutions Win Big In Autodesk

Posted on April 9th, 2018

Shares of Autodesk, Inc. (ADSK) have rebounded sharply since its near 20 percent decline from November 28 through December 26. Hedge funds and institutions were busy acquiring the stock during that steep sell-off. The purchases in the fourth quarter have paid off in a big way with shares of Autodesk jumping by nearly 20 percent in 2018.

Autodesk has been a core holding in the WhaleWisdom WhaleIndex Portfolio since February 15, 2017. The stock has risen by over 49 percent since being added, and institutions and hedge funds have been steadily increasing their ownership of the software company as well.

Institutions Adding

During the fourth quarter, 47 institutions created or added to positions in the stock, while 49 institutions reduced or closed out their positions. However, the aggregate number of shares held in the stock increased by nearly 15 percent to 30.18 million shares, up from 26.31 million in the third quarter.

Citadel Advisors, LLC and Viking Global, LP were two of the largest buyers adding over 2.749 million and 1.664 million shares, respectively. However, Wellington Management Group, LLP trimmed its position nearly by roughly 1.9 million shares, reducing its stake by nearly 40 percent.

Bullish Analyst

Analysts are bullish on the stock as well with the forecast calling for earnings growth of over 250 percent in fiscal 2020 to $3.19 per share, from $0.90, while revenue is expected to climb over 27 percent, to $3.179 billion from $2.496 billion.  Analysts are looking for Autodesk’s bull run to continue in 2018, with an average price target of nearly $144 per share, 15 percent higher than its current stock price of $125.75.  Nearly 78 percent of the 23 analysts that follow the stock have a “buy” or “outperform” rating on the stock, while roughly 22 percent have “hold” or “sell” recombination, according to Ycharts.

Not All Rosy

It is not all rosy for Autodesk because those same analysts have also been trimming their outlook of the monstrous earnings growth rate.  Over the past 30 days, analysts have been slashing their full-year earnings outlook for fiscal 2019 by nearly 28 percent and trimming revenue estimates by 2 percent.  The outlook for first quarter 2019 has also declined, with earnings estimates dropping nearly 82 percent over the past 30 days to $0.03, while revenue has been cut by nearly 4 percent to $562 million when the company next reports results in the middle of May.

With institutions betting that shares of Autodesk would rise in the first quarter of 2018, we might start getting a look at what they think about the company for the balance of the year when first-quarter filings start getting released from now until May 15. We might even know ahead of the next round of quarterly results, and it could be a good indication where shares go for the balance of the year.

Roku had been among the hottest in the stock market in 2017, with the stock climbing by 120 percent. However, 2018 has been a different story with the stock falling by nearly 40 percent. The outlook may not get better in the near-term either because according to data collected by WhaleWisdom, insiders have been dumping the stock since the expiration of the initial public offering (IPO) lock-up.

Roku, the maker of a stream media player, came public on September 27, 2017, at a price of $14. The lock-up period for insiders, owners of the stock before the IPO, could not sell their holdings for 180 days. It means insider first became eligible to sell shares at the end of March.

Insider Sales

According to the prospectus, a hand full of venture funds held shares of Roku before the stock came public, acquired through private placements. However, through recent form 4 filings, it appears these funds are now beginning to distribute their shares to the general and limited partners.

Globespan Capital Partners V LP owned about 5.226 million shares of Roku and from March 27 through March 29, have sold nearly 1.6 million of those shares in a price range between $31 and $33.50. The shares sold to this point by this fund represent about 11 percent of Roku’s total volume over those three trading days of 14.1 million share.

Menlo Ventures owns about 24.2 million shares of Roku, and while form 4’s do not show that they started selling shares yet, it shows they have converted their stock from class A to Class B common shares, and have distributed 4.3 million of the total shares to their general partners.

Institutions Avoid Roku

It would also seem that not many hedge funds or institutions were buying shares of Roku during the fourth quarter as the stock was climbing. In fact, when reviewing the data, it appears they have been selling their shares. During the quarter 67 funds created new positions and 22 added to existing positions, while 27 closed out their positions and 15 reduced the stake. However, the number of aggregate 13F shares on December 31 was only 10.3 million, down nearly 55 percent from 22.77 million on September 30.

Short Selling Surges

Roku’s short interest has been steadily climbing as well, and sits at near record levels for the stock, with nearly 9.26 million shares short. It represents nearly 59 percent of the Roku’s total float. The reason for the sharp rise in the short interest may have been in anticipation of insiders selling their stock.

Roku’s shares may continue to see pressure in the coming weeks, should insiders continue to sell their stock, something worth keeping an extremely close watch over.

MuleSoft Inc. (MULE) isn’t a name we all come across often, but the week-ended March 23 saw Salesforce.com Inc. (CRM) announce it would acquire the software company for nearly $6.5 billion, a huge buyout for a company that had a market value of approximately $4 billion on March 1. But some investors were loading up on shares of the stock during the fourth quarter. The stock was also added to the WhaleWisdom Whale Index 100 on February 15, after evaluating all the recent fourth quarter filings.

The stock was having a momentous year and had already been up by 48.5 percent through March 16. However, after the announcement of the deal, the stock nearly doubled and is now up 89 percent in 2018.

Big Buying Activity

According to data on WhaleWisdom’s website, 64 funds created new positions in the stock during the fourth quarter, while 60 funds adds to their current holdings. However, surprisingly, only 17 funds closed out their position, while 19 lowered their stakes.

(WhaleWisdom)

 

2 Funds Make A Huge Bet

A couple of funds made big bets on the stock during the fourth-quarter such as Sylebra HK Company Ltd, based in Hong Kong. Which acquired nearly 4.6 million shares, a market value at the time of $106.7 million, giving them a 6.1 percent stake in the company.

Palo Alto-based Meritech Capital Associates IV, LLC was another aggressive buyer of the stock during the fourth-quarter.  The fund bought approximately 3.1 million shares of the stock for a market value of $72.3 million, making it 42.6 percent the funds total portfolio, a concentrated bet.

All About Growth

There were plenty of other funds making big bets in the stock, but for these two funds, it paid off in a big way. Analysts are looking for this company to see huge growth over the next few years, with revenue expected to climb to $713.50 million in the year 2020, from just $296 million in 2017, according to data on Ycharts.

Investors were clearly betting on MuleSofts long-term growth opportunities in cloud computing, and its Anypoint Platform for API connectivity.  A platform that Salesforce sees as a way to add another layer of growth to their rapidly growing business.

It is not always the case that tracking investors buy and selling activity of stocks works out so well. However, in this case, watching the big bets by the two funds and the overall heavily bullish sentiment of other funds during the quarter paid off in an enormous way.

Cognizant Technology Solutions Corp, (CTSH) shares have surged by nearly 42.5 percent over the past 52-weeks, and by over 18 percent in 2018. According to 13F filings on WhaleWisdom, investors were adding shares of the stock to their portfolio during the fourth quarter, while also being added to the WhaleWisdom WhaleIndex 100 on February 15.

The bullish investor optimism comes despite a muted outlook from sell-side analyst, which see the stock rising to only $88.75 on average according to data from Ycharts. It could be an indication there is not much more room for shares of Cognizant to increase, or that analysts are underestimating Cognizant’s business and will need to up those estimates and targets.

A Large Number Of Funds Enter

According to WhaleWisdom, 150 funds started new positions in the stock during the fourth quarter, while 361 bought more shares. Only 57 managers closed out their holdings, while 345 reduced the number of shares held. The aggregate 13F shares as of December 31, 2017, increased by 2.12 percent to 517.588 million.

Concentrated Bets

Ten funds made big bets shares would continue to rise in 2018, with Cognizant representing 7.5 percent or more of the funds’ total holdings.  During the quarter Winslow Capital Management initiated a 3 million share position in the stock, a market value of $217.5 million, while Arrowstreet Capital added 4.4 million shares, a market value of $314 million. Both represent significant increases by market value during the quarter.

Analysts Not as Optimistic

However, Analysts do not seem as bullish on the stock, with the average price target of $88.75, roughly 5 percent above the current stock price of approximately $84.60. It could be because analysts are forecasting growth at Cognizant to slow substantially over the coming years. Analysts are only predicting sales growth of 8.8 percent in 2019 to $17.6 billion, while earnings are expected to climb by 13.1 percent to $5.15 per share. While the stock currently looks cheap, adjusted for growth shares gets expensive.

Not Cheap Currently

With the stock currently trading at 16.5 times 2019 earnings estimates, with a growth rate of 13.1 percent, the 2019 PEG ratio climbs to 1.25, making shares not all that cheap. However, it also demonstrates why investors were likely buying up shares of Cognizant in the fourth quarter, because they saw shares as being cheap at the time. The big gains since the start of 2018, have likely made the stock a winning investment for most funds.

However, the shares are already up quite a bit in 2018, and it will be interesting to see if the investors adding in the fourth quarter stick around beyond the first quarter or if they will dump their shares and take their profits.