Shares of Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRIP) jumped as high as nearly 9% in Tuesday intra-day trading after the firm reported better-than-expected results for its second quarter. China’s largest online travel portal said non-GAAP diluted earnings per share and net revenues for the second quarter were 1.86 yuan ($0.30) and 2.53 billion yuan ($408 million), respectively. Revenue is up 47% year-on-year and the adjusted earnings per diluted share reported by the firm handily beat expectations of just $0.01 per share. Among the four business lines of the firm, its accommodation and transportation segments posted revenues of $178 million and $170 million, respectively. The firm’s accommodation business grew by 55% in volume and by 47% in terms of revenue growth. Its transportation segment advanced by 106% in volume and by 45% in revenue growth. The packages and corporate segments accounted for the remaining $72 million in revenue. The earnings beat comes as the company kept costs down, particularly in general and administrative, and sales and marketing expenses.
Hedge funds appear to have had an idea that Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) would perform well in the second quarter. At the end of the first quarter, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, up from 28 in the previous quarter. Furthermore, there was a 40.77% quarter-over-quarter increase of hedge fund holdings in Ctrip by March 31 to $2.31 billion. Even though the stock climbed by 28.84% in the same period, this still means hedge funds grew their holdings in the stock in the first quarter. They were rewarded in the second quarter with a 23.88% share price growth.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 123.1% since then and outperformed the S&P500 Index by 66.5 percentage points (see more details here). That’s why we believe it is important to pay attention to hedge fund sentiment. Plus, we also don’t like paying huge fees.
How are hedge funds trading Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP)?
Based on the Insider Monkey database, OZ Management, led by Daniel S. Och, held the largest position in Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) at the end of the first quarter, owning 4.64 million shares worth $272.06 million. Coming in second is Lei Zhang of Hillhouse Capital Management, with a $249.7 million position held in 4.26 million shares. Some other members of the smart money with similar optimism consist of Andreas Halvorsen’s Viking Global, and Ken Fisher’s Fisher Asset Management.
Consequently, key money managers were leading the bulls’ herd. Hoplite Capital Management, managed by John Lykouretzos, established the biggest position in Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) in the first quarter with a $93.42 million position consisting of 1.59 million shares. Matthew Knauer and Mina Faltas’s Nokota Management also initiated a $46.96 million position, which contained call options underlying 801,000 shares. The following funds were also among the new Ctrip.com investors: Parag Vora’s HG Vora Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Michael Doheny’s Freshford Capital Management.
Due to the fact that hedge funds are increasingly going long on Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP), we also endorse buying the stock.
Disclosure: None
