We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Hutchison China MediTech Limited (NASDAQ:HCM) based on that data.
Is Hutchison China MediTech Limited (NASDAQ:HCM) going to take off soon? Investors who are in the know are taking a pessimistic view. The number of bullish hedge fund bets fell by 5 recently. Our calculations also showed that HCM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the eyes of most shareholders, hedge funds are viewed as underperforming, outdated financial tools of yesteryear. While there are greater than 8000 funds in operation at the moment, We look at the elite of this club, approximately 850 funds. These investment experts manage the majority of the smart money’s total capital, and by paying attention to their first-class stock picks, Insider Monkey has brought to light many investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Sander Gerber of Hudson Bay Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the latest hedge fund action encompassing Hutchison China MediTech Limited (NASDAQ:HCM).
What have hedge funds been doing with Hutchison China MediTech Limited (NASDAQ:HCM)?
At Q4’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -42% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in HCM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Sander Gerber’s Hudson Bay Capital Management has the largest position in Hutchison China MediTech Limited (NASDAQ:HCM), worth close to $8.2 million, accounting for 0.2% of its total 13F portfolio. On Hudson Bay Capital Management’s heels is Renaissance Technologies, with a $7.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions encompass Manoj Jain and Sohit Khurana’s Maso Capital, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Maso Capital allocated the biggest weight to Hutchison China MediTech Limited (NASDAQ:HCM), around 0.56% of its 13F portfolio. Hudson Bay Capital Management is also relatively very bullish on the stock, dishing out 0.18 percent of its 13F equity portfolio to HCM.
Because Hutchison China MediTech Limited (NASDAQ:HCM) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of money managers that elected to cut their entire stakes last quarter. At the top of the heap, Matthew Moskey and Friedrich Schulte-Hillen’s Athos Capital said goodbye to the largest stake of the 750 funds watched by Insider Monkey, comprising close to $1.5 million in stock, and John W. Moon’s Moon Capital was right behind this move, as the fund cut about $1.1 million worth. These transactions are important to note, as total hedge fund interest fell by 5 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Hutchison China MediTech Limited (NASDAQ:HCM) but similarly valued. These stocks are Boyd Gaming Corporation (NYSE:BYD), Itron, Inc. (NASDAQ:ITRI), Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI), and Federated Investors Inc (NYSE:FII). This group of stocks’ market valuations resemble HCM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BYD | 30 | 216098 | 3 |
| ITRI | 21 | 456240 | -4 |
| SHI | 3 | 14883 | -1 |
| FII | 29 | 236110 | 2 |
| Average | 20.75 | 230833 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $20 million in HCM’s case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) is the least popular one with only 3 bullish hedge fund positions. Hutchison China MediTech Limited (NASDAQ:HCM) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately HCM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HCM investors were disappointed as the stock returned -27.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
