Is Twitter Inc Finding Hedge Fund Support?

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After sliding from a high near $70 in December of 2013 to a price of $32.20, investors who were sold the hot tech high flyer may have been exiting the past few months with a case of whiplash.  But is now the opportunity to buy?  Some hedge funds may thinks so, and they are picking a bottom.

Twitter’s stock up on high recent volume

Twitter Inc (NYSE:TWTR) was up nearly 1% on Thursday following heavy recent buying. The day before the stock bottomed on May 6, volume spiked in a pattern similar to the December 26 top, when sellers began exiting the stock with superb timing. Volume spikes are sometimes a sign of hedge fund accumulation.  Could hedge funds be buying at the bottom?

As rumors make the rounds that hedge funds are attempting to pick a bottom in the stock, and with Twitter Inc (NYSE:TWTR) trading outside a typical band of standard deviation that some quantitative hedge funds watch, the move in the stock price could be fundamental as well.

Buy rating as volume spikes

Last week SunTrust’s Robert Peck upped the rating on the stock from “neutral” to “buy,” just as the bulk of the buying in Twitter Inc (NYSE:TWTR) was under way.  Peck believes Twitter is a platform similar to Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB) and LinkedIn Corp (NYSE:LNKD) that will endure, saying the firm has a “a long runway in its core business.”

Twitter has become a news feed of sorts and is populated by a professional audience of media, technology and financial elite, but has not grasp the mainstream audience that Facebook, for instance, attracts.  The entire technology segment had come under fire recently, with once high flying tech stocks now in the doghouse as large-cap establishment names, as measured by the Dow Jones Industrial Average and Standard and Poor’s 500 indexes, reaching all time highs.

With the upgrade, Peck also called for a $45 price target in the stock alongside a multiple of 13 times 2015 revenue estimates, up from its current 9 times multiple of earnings.

When comparing Facebook to Twitter, Peck says it’s not apples to apples, noting that Twitter Inc (NYSE:TWTR) can work as an investment even though it doesn’t reach the widespread mass popularity of Facebook Inc (NASDAQ:FB).

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About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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