Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Tuniu Corporation (NASDAQ:TOUR) shareholders have witnessed a decrease in hedge fund interest lately. Our calculations also showed that TOUR isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let’s take a glance at the latest hedge fund action surrounding Tuniu Corporation (NASDAQ:TOUR).
What have hedge funds been doing with Tuniu Corporation (NASDAQ:TOUR)?
Heading into the third quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the first quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in TOUR a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Jonathan Guo’s Yiheng Capital has the largest position in Tuniu Corporation (NASDAQ:TOUR), worth close to $19.4 million, comprising 2.3% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $3.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions consist of D. E. Shaw’s D E Shaw, Simon Sadler’s Segantii Capital and .
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: PEAK6 Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified TOUR as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Tuniu Corporation (NASDAQ:TOUR) but similarly valued. These stocks are Silvercorp Metals Inc. (NYSE:SVM), Franklin Financial Network Inc (NYSE:FSB), Hingham Institution for Savings (NASDAQ:HIFS), and Bonanza Creek Energy Inc (NYSE:BCEI). All of these stocks’ market caps match TOUR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SVM | 9 | 18803 | 0 |
| FSB | 4 | 11794 | 0 |
| HIFS | 5 | 6588 | 4 |
| BCEI | 15 | 147271 | -1 |
| Average | 8.25 | 46114 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $23 million in TOUR’s case. Bonanza Creek Energy Inc (NYSE:BCEI) is the most popular stock in this table. On the other hand Franklin Financial Network Inc (NYSE:FSB) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Tuniu Corporation (NASDAQ:TOUR) is even less popular than FSB. Hedge funds dodged a bullet by taking a bearish stance towards TOUR. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TOUR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TOUR investors were disappointed as the stock returned -7.7% 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.
