Hedge Funds Have Never Been More Bullish On iQIYI, Inc. (IQ)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about iQIYI, Inc. (NASDAQ:IQ).

iQIYI, Inc. (NASDAQ:IQ) has seen an increase in hedge fund interest lately. iQIYI, Inc. (NASDAQ:IQ) was in 40 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that IQ isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to check out the recent hedge fund action surrounding iQIYI, Inc. (NASDAQ:IQ).

Do Hedge Funds Think IQ Is A Good Stock To Buy Now?

At Q1’s end, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in IQ a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

The largest stake in iQIYI, Inc. (NASDAQ:IQ) was held by Hillhouse Capital Management, which reported holding $642.3 million worth of stock at the end of December. It was followed by D E Shaw with a $152.4 million position. Other investors bullish on the company included Millennium Management, Point72 Asset Management, and CaaS Capital. In terms of the portfolio weights assigned to each position Long Corridor Asset Management allocated the biggest weight to iQIYI, Inc. (NASDAQ:IQ), around 20.75% of its 13F portfolio. Long Corridor Asset Management is also relatively very bullish on the stock, dishing out 15.47 percent of its 13F equity portfolio to IQ.

Now, key money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the biggest position in iQIYI, Inc. (NASDAQ:IQ). Point72 Asset Management had $62.3 million invested in the company at the end of the quarter. David Tepper’s Appaloosa Management LP also initiated a $27.3 million position during the quarter. The following funds were also among the new IQ investors: Brian Ashford-Russell and Tim Woolley’s Polar Capital, Himanshu Gulati’s Antara Capital, and Renaissance Technologies.

Let’s check out hedge fund activity in other stocks similar to iQIYI, Inc. (NASDAQ:IQ). We will take a look at Crown Holdings, Inc. (NYSE:CCK), Oak Street Health, Inc. (NYSE:OSH), Carlyle Group Inc (NASDAQ:CG), UDR, Inc. (NYSE:UDR), Open Text Corporation (NASDAQ:OTEX), Icahn Enterprises LP (NASDAQ:IEP), and Brown & Brown, Inc. (NYSE:BRO). All of these stocks’ market caps match IQ’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $2362 million. That figure was $1362 million in IQ’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 4 bullish hedge fund positions. iQIYI, Inc. (NASDAQ:IQ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IQ is 72.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately IQ wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IQ were disappointed as the stock returned -4.4% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.

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