eBay Inc (EBAY): An Insider Is Buying, Should You?
eBay Inc (NASDAQ:EBAY) has better visitor conversion rates than Amazon, but it trades at a fraction of the multiple. To some investors, both stocks will eventually converge on an earnings or sales basis in the long-run, so it may not be a bad idea to consider eBay. One insider is, but what about hedge funds?
In the eyes of many of your peers, hedge funds are viewed as delayed, outdated investment tools of a forgotten age. Although there are In excess of 8,000 hedge funds with their doors open today, Insider Monkey looks at the moguls of this club, about 525 funds. It is widely held that this group oversees the lion's share of the smart money's total assets, and by watching their best investments, we've discovered a number of investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).
Equally as key, positive insider trading activity is another way to analyze the investments you're interested in. There are many stimuli for a corporate insider to sell shares of his or her company, but just one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the market-beating potential of this strategy if "monkeys" understand where to look (learn more here).
Now that that's out of the way, it's important to analyze the latest info surrounding eBay Inc (NASDAQ:EBAY).
What have hedge funds been doing with eBay Inc (NASDAQ:EBAY)?
At Q2's end, a total of 81 of the hedge funds we track were bullish in this stock, a change of -9% from the previous quarter. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully.
When using filings from the hedgies we track, Stephen Mandel's Lone Pine Capital had the most valuable position in eBay Inc (NASDAQ:EBAY), worth close to $802.5 million, accounting for 3.9% of its total 13F portfolio. Sitting at the No. 2 spot is D. E. Shaw of D E Shaw, with a $267.5 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Eric Mindich's Eton Park Capital, Rob Citrone's Discovery Capital Management and Ricky Sandler's Eminence Capital.
Since eBay Inc (NASDAQ:EBAY) has experienced declining interest from the smart money's best and brightest, we can see that there lies a certain "tier" of funds who sold off their entire stakes heading into Q2. Intriguingly, Philippe Laffont's Coatue Management dropped the largest investment of the 450+ funds we track, worth an estimated $162.6 million in stock, and James Crichton and Adam Weiss of Scout Capital Management was right behind this move, as the fund cut about $124.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 8 funds heading into Q2.
What have insiders been doing with eBay Inc (NASDAQ:EBAY)?
Bullish insider trading is particularly usable when the company we're looking at has experienced transactions within the past 180 days. Over the last six-month time frame, eBay Inc (NASDAQ:EBAY) has experienced 1 unique insiders purchasing, and 9 insider sales (see the details of insider trades here).
We'll also take a look at the relationship between both of these indicators in other stocks similar to eBay Inc (NASDAQ:EBAY). These stocks are PC Connection, Inc. (NASDAQ:PCCC), Liquidity Services, Inc. (NASDAQ:LQDT), Mercadolibre Inc (NASDAQ:MELI), Liberty Interactive (Interactive group) (NASDAQ:LINTA), and Amazon.com, Inc. (NASDAQ:AMZN). This group of stocks are the members of the catalog & mail order houses industry and their market caps resemble EBAY's market cap.
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling
PC Connection, Inc. (NASDAQ:PCCC)
Liquidity Services, Inc. (NASDAQ:LQDT)
Mercadolibre Inc (NASDAQ:MELI)
Liberty Interactive (Interactive group) (NASDAQ:LINTA)
Amazon.com, Inc. (NASDAQ:AMZN)
Using the returns demonstrated by our research, regular investors must always keep one eye on hedge fund and insider trading activity, and eBay Inc (NASDAQ:EBAY) is no exception.