Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
China XD Plastics Co Ltd (NASDAQ:CXDC) investors should be aware of an increase in support from the world’s most elite money managers of late. China XD Plastics Co Ltd (NASDAQ:CXDC) was in 4 hedge funds’ portfolios at the end of September. There were 3 hedge funds in our database with China XD Plastics Co Ltd (NASDAQ:CXDC) holdings at the end of the previous quarter. At the end of this article, we will also compare China XD Plastics Co Ltd (NASDAQ:CXDC) to other stocks, including Enzymotec Ltd (NASDAQ:ENZY), Bonanza Creek Energy Inc (NYSE:BCEI), and Xerium Technologies, Inc. (NYSE:XRM) to get a better sense of its popularity.
Follow China Xd Plastics Co Ltd (NASDAQ:CXDC)
Follow China Xd Plastics Co Ltd (NASDAQ:CXDC)
To most investors, hedge funds are assumed to be worthless, old investment tools of the past. While there are more than 8000 funds in operation at the moment, We choose to focus on the top tier of this group, around 700 funds. Most estimates calculate that this group of people oversee the lion’s share of all hedge funds’ total capital, and by observing their matchless picks, Insider Monkey has brought to light a few investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per year for a decade in their back tests.
With all of this in mind, let’s take a look at the new action regarding China XD Plastics Co Ltd (NASDAQ:CXDC).
Hedge fund activity in China XD Plastics Co Ltd (NASDAQ:CXDC)
Heading into Q4, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 33% from the second quarter. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Glenhill Advisors, managed by Glenn J. Krevlin, holds the most valuable position in China XD Plastics Co Ltd (NASDAQ:CXDC). Glenhill Advisors has a $10.2 million position in the stock, comprising 0.8% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, which holds a $2.4 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions consist of Dmitry Balyasny’s Balyasny Asset Management, and Ken Griffin’s Citadel Investment Group.
As industrywide interest jumped, some big names have been driving this bullishness. Balyasny Asset Management initiated the most outsized position in China XD Plastics Co Ltd (NASDAQ:CXDC). Balyasny Asset Management had $0.1 million invested in the company at the end of the quarter. Citadel Investment Group also made a $0.1 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as China XD Plastics Co Ltd (NASDAQ:CXDC) but similarly valued. We will take a look at Enzymotec Ltd (NASDAQ:ENZY), Bonanza Creek Energy Inc (NYSE:BCEI), Xerium Technologies, Inc. (NYSE:XRM), and Utah Medical Products, Inc. (NASDAQ:UTMD). This group of stocks’ market valuations is closest to China XD Plastics Co Ltd (NASDAQ:CXDC)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENZY | 5 | 68203 | 0 |
| BCEI | 15 | 53754 | -3 |
| XRM | 9 | 33509 | -2 |
| UTMD | 4 | 21949 | -1 |
As you can see, these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $13 million in China XD Plastics Co Ltd (NASDAQ:CXDC)’s case. Bonanza Creek Energy Inc (NYSE:BCEI) is the most popular stock in this table. On the other hand, Utah Medical Products, Inc. (NASDAQ:UTMD) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, China XD Plastics Co Ltd (NASDAQ:CXDC) is even less popular than Utah Medical Products, Inc. (NASDAQ:UTMD). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.
