Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost around 20%. Facebook, which was the second most popular stock, lost 14% amid uncertainty regarding the interest rates and tech valuations. 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.
Ctrip.com International, Ltd. (NASDAQ:CTRP) has seen a large decrease in hedge fund sentiment in recent months, so much so that it was one of 10 Stocks Hedge Funds Ditched in Q3 Just Before the Market Crushed Them. Just 19 hedge funds tracked by Insider Monkey’s database still own the stock, which has lost 23% in Q4. That’s a far cry from the nearly 70 funds that owned it in early-2016, leaving Ctrip a lengthy journey to ever approach the 30 most popular stocks among hedge funds list again.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to the beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
How are hedge funds trading Ctrip.com International, Ltd. (NASDAQ:CTRP)?
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a 39% fall from the second quarter of 2018. On the other hand, there were a total of 28 hedge funds with a bullish position in CTRP at the beginning of this year. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Ctrip.com International, Ltd. (NASDAQ:CTRP), which was worth $358.8 million at the end of the third quarter. On the second spot was Tybourne Capital Management which amassed $275.1 million worth of shares. Moreover, PAR Capital Management, Silver Lake Partners, and AQR Capital Management were also bullish on Ctrip.com International, Ltd. (NASDAQ:CTRP), allocating a large percentage of their portfolios to this stock.
Since Ctrip.com International, Ltd. (NASDAQ:CTRP) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers who were dropping their positions entirely in the third quarter. It’s worth mentioning that Yi Xin’s Ariose Capital cut the biggest stake of the 700 funds followed by Insider Monkey, worth about $425.8 million in stock. J Kevin Kenny Jr’s fund, Emerging Sovereign Group, also dropped its stock, about $51.8 million worth. These moves are important to note, as aggregate hedge fund interest fell by 12 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ctrip.com International, Ltd. (NASDAQ:CTRP) but similarly valued. These stocks are International Paper Company (NYSE:IP), Nucor Corporation (NYSE:NUE), W.W. Grainger, Inc. (NYSE:GWW), and AutoZone, Inc. (NYSE:AZO). This group of stocks’ market values resemble CTRP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IP | 28 | 327944 | 7 |
| NUE | 31 | 553668 | 2 |
| GWW | 30 | 617996 | 7 |
| AZO | 30 | 920242 | -2 |
| Average | 29.75 | 605 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $605 million. That figure was $1.16 billion in CTRP’s case. Nucor Corporation (NYSE:NUE) is the most popular stock in this table. On the other hand International Paper Company (NYSE:IP) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Ctrip.com International, Ltd. (NASDAQ:CTRP) is even less popular than IP. 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 has rapidly lost interest in this stock.
Disclosure: None. This article was originally published at Insider Monkey.
