“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Momo Inc (NASDAQ:MOMO).
Momo Inc (NASDAQ:MOMO) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. MOMO was in 27 hedge funds’ portfolios at the end of the third quarter of 2019. There were 22 hedge funds in our database with MOMO holdings at the end of the previous quarter. Our calculations also showed that MOMO 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.
James Dinan of York Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the latest hedge fund action surrounding Momo Inc (NASDAQ:MOMO).
What have hedge funds been doing with Momo Inc (NASDAQ:MOMO)?
Heading into the fourth quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the second quarter of 2019. By comparison, 45 hedge funds held shares or bullish call options in MOMO a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Momo Inc (NASDAQ:MOMO), with a stake worth $415.4 million reported as of the end of September. Trailing Renaissance Technologies was Platinum Asset Management, which amassed a stake valued at $122.9 million. Yiheng Capital, Bloom Tree Partners, and Kylin Management 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 Kylin Management allocated the biggest weight to Momo Inc (NASDAQ:MOMO), around 13.28% of its portfolio. Dalton Investments is also relatively very bullish on the stock, dishing out 11.64 percent of its 13F equity portfolio to MOMO.
As one would reasonably expect, some big names have been driving this bullishness. Hillhouse Capital Management, managed by Lei Zhang, initiated the most valuable position in Momo Inc (NASDAQ:MOMO). Hillhouse Capital Management had $42.9 million invested in the company at the end of the quarter. James Dinan’s York Capital Management also initiated a $16.7 million position during the quarter. The other funds with new positions in the stock are Run Ye, Junji Takegami and Hoyon Hwang’s Tiger Pacific Capital, Fang Zheng’s Keywise Capital Management, and Panayotis Takis Sparaggis’s Alkeon Capital Management.
Let’s check out hedge fund activity in other stocks similar to Momo Inc (NASDAQ:MOMO). These stocks are Israel Chemicals Ltd. (NYSE:ICL), Sealed Air Corporation (NYSE:SEE), Haemonetics Corporation (NYSE:HAE), and Entegris Inc (NASDAQ:ENTG). This group of stocks’ market values resemble MOMO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICL | 5 | 21431 | -1 |
| SEE | 32 | 950679 | 5 |
| HAE | 21 | 601291 | -2 |
| ENTG | 26 | 807428 | 2 |
| Average | 21 | 595207 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $595 million. That figure was $827 million in MOMO’s case. Sealed Air Corporation (NYSE:SEE) is the most popular stock in this table. On the other hand Israel Chemicals Ltd. (NYSE:ICL) is the least popular one with only 5 bullish hedge fund positions. Momo Inc (NASDAQ:MOMO) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on MOMO as the stock returned 20.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
