Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) was in 6 hedge funds’ portfolios at the end of September. JASO investors should be aware of a decrease in support from the world’s most successful money managers of late. There were 8 hedge funds in our database with JASO holdings at the end of the previous quarter. At the end of this article we will also compare JASO to other stocks including LSB Industries, Inc. (NYSE:LXU), Star Bulk Carriers Corp. (NASDAQ:SBLK), and Tabula Rasa HealthCare Inc (NASDAQ:TRHC) to get a better sense of its popularity.
Follow J A Solar Holdings Co Ltd (NASDAQ:JASO)
Follow J A Solar Holdings Co Ltd (NASDAQ:JASO)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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With all of this in mind, let’s check out the latest action encompassing JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO).
What does the smart money think about JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in JASO heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Shah Capital Management, led by Himanshu H. Shah, holds the largest position in JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO). Shah Capital Management has a $2.9 million position in the stock, comprising 1.6% of its 13F portfolio. The second largest stake is held by Two Sigma Advisors, led by John Overdeck and David Siegel, which holds a $0.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism consist of Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Larry Chen and Terry Zhang’s Tairen Capital. We should note that Shah Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Because JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) has sustained falling interest from hedge fund managers, logic holds that there was a specific group of hedge funds that decided to sell off their positions entirely heading into Q4. Interestingly, Jonathan Barrett and Paul Segal’s Luminus Management cashed in the largest position of the 700 funds watched by Insider Monkey, worth close to $3 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $0.2 million worth of shares.
Let’s now review hedge fund activity in other stocks similar to JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO). These stocks are LSB Industries, Inc. (NYSE:LXU), Star Bulk Carriers Corp. (NASDAQ:SBLK), Tabula Rasa HealthCare Inc (NASDAQ:TRHC), and Hill International Inc (NYSE:HIL). This group of stocks’ market caps are similar to JASO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LXU | 8 | 31284 | -1 |
| SBLK | 6 | 163101 | -1 |
| TRHC | 6 | 13360 | 6 |
| HIL | 8 | 29666 | -1 |
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $5 million in JASO’s case. LSB Industries, Inc. (NYSE:LXU) is the most popular stock in this table. On the other hand Star Bulk Carriers Corp. (NASDAQ:SBLK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) is even less popular than SBLK. 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.
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