It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Phoenix New Media Ltd ADR (NYSE:FENG).
Phoenix New Media Ltd ADR (NYSE:FENG) was in 7 hedge funds’ portfolios at the end of September. FENG investors should pay attention to a decrease in enthusiasm from smart money lately. There were 9 hedge funds in our database with FENG positions at the end of the previous quarter. Our calculations also showed that FENG 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.
In the financial world there are a multitude of gauges stock market investors can use to evaluate publicly traded companies. Some of the most useful gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass the broader indices by a significant amount (see the details here).
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a look at the key hedge fund action regarding Phoenix New Media Ltd ADR (NYSE:FENG).
How have hedgies been trading Phoenix New Media Ltd ADR (NYSE:FENG)?
Heading into the fourth quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FENG over the last 17 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, International Value Advisers was the largest shareholder of Phoenix New Media Ltd ADR (NYSE:FENG), with a stake worth $12.8 million reported as of the end of September. Trailing International Value Advisers was Sylebra Capital Management, which amassed a stake valued at $2.5 million. Renaissance Technologies, Park West Asset Management, and Polar Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position International Value Advisers allocated the biggest weight to Phoenix New Media Ltd ADR (NYSE:FENG), around 0.47% of its 13F portfolio. Sylebra Capital Management is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to FENG.
Seeing as Phoenix New Media Ltd ADR (NYSE:FENG) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedgies who sold off their entire stakes by the end of the third quarter. Interestingly, Nick Thakore’s Diametric Capital dumped the biggest investment of the 750 funds monitored by Insider Monkey, worth about $0.1 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its stock, about $0 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Phoenix New Media Ltd ADR (NYSE:FENG). These stocks are Elevate Credit, Inc. (NYSE:ELVT), Calyxt, Inc. (NASDAQ:CLXT), Bel Fuse, Inc. (NASDAQ:BELFB), and Federated National Holding Co (NASDAQ:FNHC). This group of stocks’ market valuations match FENG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ELVT | 11 | 20789 | 1 |
| CLXT | 5 | 3076 | 2 |
| BELFB | 7 | 18883 | 0 |
| FNHC | 7 | 24724 | 0 |
| Average | 7.5 | 16868 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $19 million in FENG’s case. Elevate Credit, Inc. (NYSE:ELVT) is the most popular stock in this table. On the other hand Calyxt, Inc. (NASDAQ:CLXT) is the least popular one with only 5 bullish hedge fund positions. Phoenix New Media Ltd ADR (NYSE:FENG) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on FENG as the stock returned 20.3% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
