Four times a year, institutional investors with at least $100 million in assets are made to share their holdings through public filings. These filings are called 13Fs, and they’re a window into what banks, hedge funds, and RIAs are buying. Where smart money puts their money is often times a good indicator of where money might be made.
One excellent tool to visualize the increased interest from big money is WhaleWisdom, which aggregates 13Fs in a heatmap every quarter. The heatmap looks at the stock buying activity of over two dozen hedge funds and money managers, identifying the 40 “hottest” companies on markets. Many of these hedge funds are apart of Whale Wisdom’s proverbial “whale index”, which tracks the returns of successful hedge funds. Over the last five years, these companies have more than doubled their market returns. The heatmap is easy on the eyes, but doesn’t provide a lot of additional context. So, we’re breaking down the top five holdings from the WhaleWisdom 13F heatmap:
1. Carvana ($CVNA)
The hottest stock among big money was Carvana, the online used car retailer. You may know Carvana exclusively from their multi-storey car “vending machines” or their ads interrupting your shows on Hulu. However, Carvana has become a serious business mingling on the edge of e-commerce and physical retail. Over the last year, Carvana has risen over 213%.
The company has repeatedly impressed investors with revenue growth, but struggled to move toward profitability. In 2018, the company reported nearly $2 billion in revenue. The following year, their revenue doubled to nearly $4 billion. The company is expectant upon double-digit growth for the years to come, which is supported by analyst data reported by atom.finance. However, the company’s near-term plans for profitability are unclear.
Despite this, institutional money is ready to take a chance on Carvana and its new-age approach to buying and selling cars. The company was ranked No. 24 on the Q3 2020 heatmap, evidence that this stock has continued to inspire interest from big money.
2. Tandem Diabetes Care Inc. ($TNDM)
The second most subscribed company from Q4 2020 is definitely not a household name among Americans or investors. However, diabetics might be familiar with Tandem Diabetes Care. Tandem creates digital insulin pumps and infusion products. Their flagship products can intelligently predict glucose levels for diabetic Americans, inject insulin automatically and then stop injection once levels have restored. No need for needles or blood pricks.
Tandem’s price has not ballooned nearly as fast as other members on this list, growing just over 15% in the last year. The company has been unprofitable as its revenues have grown to nearly $500 million per year. In 2021, analysts expect Tandem to post a narrow profit according to Atom.Finance. However, that is contingent on sales success during the ongoing COVID-19 pandemic. The company’s finances suggest that Tandem has the makings of a successful value stock.
3. Pinduoduo ($PDD)
Momentum stocks are increasingly coming from the burgeoning class of agricultural tech (agtech) stocks. Institutional investors appear to be getting in on the action, picking up shares in the Chinese e-commerce platform Pinduoduo. Pinduoduo is developing into an Amazon for fresh produce, tech and other products. At its core, Pinduoduo is an agtech platform that connects farmers, distributors, buyers and consumers. It is the second biggest e-commerce platform and the biggest agtech platform in China, boasting over 640 million active users as of Q3 2020. It has gone on a 456% run over the last year.
Pinduoduo CEO Colin Huang has described the company as “a mixture of Costco and Disneyland.”
The company sold over 1.45 trillion yuan ($US224 billion) of “stuff” on their platform throughout 2020, up 73% year-over-year. On the heels of all this marketplace activity is an estimated 52 billion yuan in revenue (approximately $US8 billion) for 2020, according to Atom.Finance. With these kinds of numbers, the company is inching closer to being bigger than the Chinese multinational e-commerce company Alibaba. Analysts expect Penduoduo to report a profit in 2021.
4. Smartsheet Inc. ($SMAR)
Smartsheet is a cloud-based enterprise productivity platform that falls somewhere between Microsoft Excel, Asana and Airtable. If any of that made sense to you, congratulations for working online during the COVID-19 pandemic. If none of that makes sense to you, the best way to think about it is that Smartsheet is a liken to a digital office space for companies.
Smartsheet was already a popular pick among institutional investors in Q3 2020 as the COVID-19 pandemic required companies to pivot their workplaces to digital solutions. In Q4 2020, the company has become even more popular, ending up fourth on the list. The company is relatively small and unprofitable at the moment. The company is projected to make $378 million in 2020, with revenues rising for the years to come.
It also appears to have had enormous success, which might have priced in some of the forward-looking momentum. The company is up 60% over the last year. With no real prospects for profitability in the year ahead, Smartsheet might be a good play for investors looking for growth in digital enterprise software.
5. Crowdstrike Holdings Inc. ($CRWD)
Perhaps the most unsurprising member of this list is Crowdstrike. The cloud cybersecurity company had “momentum stock” energy this last year as it went on a 261% climb. Analysts anticipate the company will report $859 million in earnings for 2020. This is a 79% growth year-over-year.
The interest from investors is well-founded: the company is already profitable, it has appeared on WhaleWisdom’s heatmap for three consecutive quarters and earnings growth is projected to be in the double-digits for the next few years.This stock is definitely a little expensive (code for: overvalued according to fundamentals). The demand for cybersecurity services is still incredibly robust, especially given the increased enterprise needs during the COVID-19 pandemic.