We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Futu Holdings Limited (NASDAQ:FUTU).
Futu Holdings Limited (NASDAQ:FUTU) investors should be aware of a decrease in activity from the world’s largest hedge funds lately. Futu Holdings Limited (NASDAQ:FUTU) was in 23 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 31. There were 31 hedge funds in our database with FUTU holdings at the end of June. Our calculations also showed that FUTU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Daniel Sundheim of D1 Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s check out the key hedge fund action encompassing Futu Holdings Limited (NASDAQ:FUTU).
Do Hedge Funds Think FUTU Is A Good Stock To Buy Now?
At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the second quarter of 2021. On the other hand, there were a total of 15 hedge funds with a bullish position in FUTU a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chase Coleman’s Tiger Global Management LLC has the biggest position in Futu Holdings Limited (NASDAQ:FUTU), worth close to $381.4 million, corresponding to 0.7% of its total 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $67 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Shashin Shah’s Think Investments, Daniel Patrick Gibson’s Sylebra Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position IvyRock Asset Management allocated the biggest weight to Futu Holdings Limited (NASDAQ:FUTU), around 22.31% of its 13F portfolio. Aubrey Capital Management is also relatively very bullish on the stock, dishing out 5.54 percent of its 13F equity portfolio to FUTU.
Due to the fact that Futu Holdings Limited (NASDAQ:FUTU) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds who sold off their full holdings heading into Q4. It’s worth mentioning that Glen Kacher’s Light Street Capital dropped the largest position of the 750 funds tracked by Insider Monkey, worth an estimated $69.4 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $28 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Futu Holdings Limited (NASDAQ:FUTU) but similarly valued. We will take a look at Citrix Systems, Inc. (NASDAQ:CTXS), WestRock Company (NYSE:WRK), Farfetch Limited (NYSE:FTCH), American Airlines Group Inc (NASDAQ:AAL), Teck Resources Ltd (NYSE:TECK), Open Text Corporation (NASDAQ:OTEX), and Crown Holdings, Inc. (NYSE:CCK). This group of stocks’ market values are closest to FUTU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTXS | 24 | 766516 | 1 |
| WRK | 34 | 719952 | 2 |
| FTCH | 51 | 3258687 | -12 |
| AAL | 30 | 650793 | 5 |
| TECK | 41 | 1318693 | 1 |
| OTEX | 20 | 386647 | 6 |
| CCK | 52 | 2138745 | -1 |
| Average | 36 | 1320005 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1320 million. That figure was $664 million in FUTU’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Open Text Corporation (NASDAQ:OTEX) is the least popular one with only 20 bullish hedge fund positions. Futu Holdings Limited (NASDAQ:FUTU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FUTU is 23.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately FUTU wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); FUTU investors were disappointed as the stock returned -50.3% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Futu Holdings Ltd (NASDAQ:FUTU)
Follow Futu Holdings Ltd (NASDAQ:FUTU)
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Disclosure: None. This article was originally published at Insider Monkey.
