The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Sohu.com Limited (NASDAQ:SOHU) based on those filings.
Is Sohu.com Limited (NASDAQ:SOHU) worth your attention right now? Prominent investors are betting on the stock. The number of long hedge fund positions increased by 4 lately. Our calculations also showed that SOHU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the latest hedge fund action regarding Sohu.com Limited (NASDAQ:SOHU).
How are hedge funds trading Sohu.com Limited (NASDAQ:SOHU)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SOHU over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Orbis Investment Management, managed by William B. Gray, holds the biggest position in Sohu.com Limited (NASDAQ:SOHU). Orbis Investment Management has a $28.5 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, with a $25.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Lei Zhang’s Hillhouse Capital Management, Yi Xin’s Ariose Capital and Manoj Jain and Sohit Khurana’s Maso Capital. In terms of the portfolio weights assigned to each position Ariose Capital allocated the biggest weight to Sohu.com Limited (NASDAQ:SOHU), around 5.04% of its 13F portfolio. Maso Capital is also relatively very bullish on the stock, earmarking 1.19 percent of its 13F equity portfolio to SOHU.
As aggregate interest increased, key hedge funds were breaking ground themselves. Hillhouse Capital Management, managed by Lei Zhang, assembled the largest position in Sohu.com Limited (NASDAQ:SOHU). Hillhouse Capital Management had $8.1 million invested in the company at the end of the quarter. Yi Xin’s Ariose Capital also initiated a $3.9 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Michael Gelband’s ExodusPoint Capital, and Warren Lammert’s Granite Point Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Sohu.com Limited (NASDAQ:SOHU) but similarly valued. We will take a look at 111, Inc. (NASDAQ:YI), Magenta Therapeutics, Inc. (NASDAQ:MGTA), Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI), and RBB Bancorp (NASDAQ:RBB). This group of stocks’ market caps are closest to SOHU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| YI | 2 | 3771 | -1 |
| MGTA | 9 | 49838 | 1 |
| ACBI | 14 | 64813 | 2 |
| RBB | 9 | 13681 | 4 |
| Average | 8.5 | 33026 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $77 million in SOHU’s case. Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI) is the most popular stock in this table. On the other hand 111, Inc. (NASDAQ:YI) is the least popular one with only 2 bullish hedge fund positions. Sohu.com Limited (NASDAQ:SOHU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SOHU wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SOHU were disappointed as the stock returned 0.8% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
