As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about 58.com Inc (NYSE:WUBA).
Is 58.com Inc (NYSE:WUBA) a safe investment today? Prominent investors are taking a bullish view. The number of long hedge fund positions went up by 2 in recent months. Our calculations also showed that WUBA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). WUBA was in 24 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with WUBA positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Lei Zhang of Hillhouse Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the fresh hedge fund action surrounding 58.com Inc (NYSE:WUBA).
How are hedge funds trading 58.com Inc (NYSE:WUBA)?
Heading into the fourth quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WUBA over the last 17 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Kerr Neilson’s Platinum Asset Management has the biggest position in 58.com Inc (NYSE:WUBA), worth close to $82.2 million, comprising 1.8% of its total 13F portfolio. Coming in second is Lakewood Capital Management, managed by Anthony Bozza, which holds a $61.4 million position; 2.1% of its 13F portfolio is allocated to the stock. Some other peers that are bullish consist of Thomas E. Claugus’s GMT Capital, Nitin Saigal and Dan Jacobs’s Kora Management and Robert Rodriguez and Steven Romick’s First Pacific Advisors. In terms of the portfolio weights assigned to each position Kora Management allocated the biggest weight to 58.com Inc (NYSE:WUBA), around 8.81% of its portfolio. MD Sass is also relatively very bullish on the stock, setting aside 2.48 percent of its 13F equity portfolio to WUBA.
As aggregate interest increased, key hedge funds have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the most outsized position in 58.com Inc (NYSE:WUBA). Two Sigma Advisors had $2.9 million invested in the company at the end of the quarter. Lei Zhang’s Hillhouse Capital Management also initiated a $2.9 million position during the quarter. The following funds were also among the new WUBA investors: Michael Gelband’s ExodusPoint Capital and Steve Cohen’s Point72 Asset Management.
Let’s go over hedge fund activity in other stocks similar to 58.com Inc (NYSE:WUBA). These stocks are Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM), Elbit Systems Ltd. (NASDAQ:ESLT), Brookfield Renewable Partners L.P. (NYSE:BEP), and Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ). This group of stocks’ market valuations are closest to WUBA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SQM | 8 | 19977 | 1 |
| ESLT | 3 | 15834 | -2 |
| BEP | 4 | 7529 | 0 |
| JAZZ | 25 | 837365 | 5 |
| Average | 10 | 220176 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $332 million in WUBA’s case. Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 3 bullish hedge fund positions. 58.com Inc (NYSE:WUBA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on WUBA as the stock returned 24.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
