Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is HDFC Bank Limited (NYSE:HDB) a splendid investment right now? Investors who are in the know are buying. The number of long hedge fund positions rose by 3 lately. Our calculations also showed that HDB isn’t among the 30 most popular stocks among hedge funds.
At the moment there are a multitude of indicators investors use to evaluate their holdings. Two of the most underrated indicators are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best investment managers can beat the broader indices by a superb amount (see the details here).
Let’s view the key hedge fund action encompassing HDFC Bank Limited (NYSE:HDB).
What have hedge funds been doing with HDFC Bank Limited (NYSE:HDB)?
At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the second quarter of 2018. By comparison, 24 hedge funds held shares or bullish call options in HDB heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in HDFC Bank Limited (NYSE:HDB) was held by Fisher Asset Management, which reported holding $413.4 million worth of stock at the end of September. It was followed by D E Shaw with a $124 million position. Other investors bullish on the company included Two Creeks Capital Management, Viking Global, and Driehaus Capital.
Now, key hedge funds were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, established the largest position in HDFC Bank Limited (NYSE:HDB). Laurion Capital Management had $18.9 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $3.2 million position during the quarter. The other funds with brand new HDB positions are Glenn Russell Dubin’s Highbridge Capital Management, David Rodriguez-Fraile’s BlueMar Capital Management, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as HDFC Bank Limited (NYSE:HDB) but similarly valued. We will take a look at Twenty-First Century Fox Inc (NASDAQ:FOX), The Goldman Sachs Group, Inc. (NYSE:GS), Schlumberger Limited. (NYSE:SLB), and Morgan Stanley (NYSE:MS). This group of stocks’ market valuations are closest to HDB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FOX | 49 | 5335990 | 6 |
| GS | 57 | 6876991 | -4 |
| SLB | 55 | 1514319 | 12 |
| MS | 51 | 4642452 | 2 |
| Average | 53 | 4592438 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 53 hedge funds with bullish positions and the average amount invested in these stocks was $4.59 billion. That figure was $990 million in HDB’s case. The Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Twenty-First Century Fox Inc (NASDAQ:FOX) is the least popular one with only 49 bullish hedge fund positions. Compared to these stocks HDFC Bank Limited (NYSE:HDB) is even less popular than FOX. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
