You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is PPDAI Group Inc. (NYSE:PPDF) going to take off soon? Hedge funds are turning less bullish. The number of long hedge fund positions shrunk by 5 lately. Our calculations also showed that PPDF isn’t among the 30 most popular stocks among hedge funds (see the video below). PPDF was in 7 hedge funds’ portfolios at the end of June. There were 12 hedge funds in our database with PPDF 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.
To the average investor there are numerous methods stock market investors have at their disposal to analyze stocks. A couple of the less known methods are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the elite fund managers can outclass the market by a very impressive margin (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the fresh hedge fund action regarding PPDAI Group Inc. (NYSE:PPDF).
What have hedge funds been doing with PPDAI Group Inc. (NYSE:PPDF)?
At Q2’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -42% from the first quarter of 2019. By comparison, 5 hedge funds held shares or bullish call options in PPDF a year ago. 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 PPDAI Group Inc. (NYSE:PPDF) was held by Millennium Management, which reported holding $5.1 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $2.1 million position. Other investors bullish on the company included GLG Partners, Arrowstreet Capital, and Two Sigma Advisors.
Due to the fact that PPDAI Group Inc. (NYSE:PPDF) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few fund managers that slashed their positions entirely by the end of the second quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest position of all the hedgies followed by Insider Monkey, valued at close to $0.6 million in stock. Michael Platt and William Reeves’s fund, BlueCrest Capital Mgmt., also dropped its stock, about $0.3 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 5 funds by the end of the second quarter.
Let’s also examine hedge fund activity in other stocks similar to PPDAI Group Inc. (NYSE:PPDF). We will take a look at Sirius International Insurance Group, Ltd. (NASDAQ:SG), Cavco Industries, Inc. (NASDAQ:CVCO), Cars.com Inc. (NYSE:CARS), and Ra Pharmaceuticals, Inc. (NASDAQ:RARX). This group of stocks’ market valuations are closest to PPDF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SG | 1 | 3377 | 0 |
| CVCO | 16 | 135968 | -3 |
| CARS | 29 | 323559 | 2 |
| RARX | 18 | 367537 | -2 |
| Average | 16 | 207610 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $208 million. That figure was $10 million in PPDF’s case. Cars.com Inc. (NYSE:CARS) is the most popular stock in this table. On the other hand Sirius International Insurance Group, Ltd. (NASDAQ:SG) is the least popular one with only 1 bullish hedge fund positions. PPDAI Group Inc. (NYSE:PPDF) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PPDF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PPDF investors were disappointed as the stock returned -33.3% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
