Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards JD.Com Inc (NASDAQ:JD) to find out whether there were any major changes in hedge funds’ views.
JD.Com Inc (NASDAQ:JD) investors should be aware of an increase in support from the world’s most elite money managers in recent months. JD.Com Inc (NASDAQ:JD) was in 76 hedge funds’ portfolios at the end of June. The all time high for this statistic is 90. Our calculations also showed that JD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Cathie Wood of ARK Investment Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a gander at the new hedge fund action encompassing JD.Com Inc (NASDAQ:JD).
Do Hedge Funds Think JD Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 76 of the hedge funds tracked by Insider Monkey were long this stock, a change of 1% from the first quarter of 2020. By comparison, 87 hedge funds held shares or bullish call options in JD a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Tiger Global Management LLC held the most valuable stake in JD.Com Inc (NASDAQ:JD), which was worth $4117.8 million at the end of the second quarter. On the second spot was D1 Capital Partners which amassed $1240.8 million worth of shares. Viking Global, Fisher Asset Management, and ARK Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kontiki Capital allocated the biggest weight to JD.Com Inc (NASDAQ:JD), around 29.14% of its 13F portfolio. Kylin Management is also relatively very bullish on the stock, dishing out 20.49 percent of its 13F equity portfolio to JD.
As industrywide interest jumped, key hedge funds have jumped into JD.Com Inc (NASDAQ:JD) headfirst. Viking Global, managed by Andreas Halvorsen, initiated the largest position in JD.Com Inc (NASDAQ:JD). Viking Global had $657.7 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also initiated a $379.1 million position during the quarter. The other funds with brand new JD positions are Benjamin A. Smith’s Laurion Capital Management, Gabriel Plotkin’s Melvin Capital Management, and Philippe Laffont’s Coatue Management.
Let’s now review hedge fund activity in other stocks similar to JD.Com Inc (NASDAQ:JD). These stocks are American Tower Corporation (REIT) (NYSE:AMT), Sony Group Corp (NYSE:SONY), Target Corporation (NYSE:TGT), Caterpillar Inc. (NYSE:CAT), TotalEnergies SE (NYSE:TTE), General Electric Company (NYSE:GE), and HSBC Holdings plc (NYSE:HSBC). This group of stocks’ market values are similar to JD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMT | 55 | 4720340 | -3 |
| SONY | 20 | 409056 | -7 |
| TGT | 66 | 5865028 | 6 |
| CAT | 62 | 5264268 | 9 |
| TTE | 15 | 1132420 | -2 |
| GE | 67 | 6087180 | -1 |
| HSBC | 11 | 212763 | -1 |
| Average | 42.3 | 3384436 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.3 hedge funds with bullish positions and the average amount invested in these stocks was $3384 million. That figure was $10698 million in JD’s case. General Electric Company (NYSE:GE) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks JD.Com Inc (NASDAQ:JD) is more popular among hedge funds. Our overall hedge fund sentiment score for JD is 81.3. 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. 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 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. Unfortunately JD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on JD were disappointed as the stock returned -4.2% since the end of the second quarter (through 9/27) 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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
