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 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-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 JinkoSolar Holding Co., Ltd. (NYSE:JKS).
JinkoSolar Holding Co., Ltd. (NYSE:JKS) was in 8 hedge funds’ portfolios at the end of the second quarter of 2019. JKS has seen an increase in hedge fund sentiment lately. There were 6 hedge funds in our database with JKS holdings at the end of the previous quarter. Our calculations also showed that JKS 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.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the key hedge fund action surrounding JinkoSolar Holding Co., Ltd. (NYSE:JKS).
Hedge fund activity in JinkoSolar Holding Co., Ltd. (NYSE:JKS)
At Q2’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in JKS a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the largest position in JinkoSolar Holding Co., Ltd. (NYSE:JKS). Citadel Investment Group has a $6.7 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. On Citadel Investment Group’s heels is D. E. Shaw of D E Shaw, with a $6.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include Renaissance Technologies, Ernest Chow and Jonathan Howe’s Sensato Capital Management and Israel Englander’s Millennium Management.
As aggregate interest increased, some big names were breaking ground themselves. D E Shaw, managed by D. E. Shaw, assembled the most outsized position in JinkoSolar Holding Co., Ltd. (NYSE:JKS). D E Shaw had $6.1 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $4.1 million position during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management and Michael Gelband’s ExodusPoint Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as JinkoSolar Holding Co., Ltd. (NYSE:JKS) but similarly valued. These stocks are Rudolph Technologies Inc (NYSE:RTEC), Golden Ocean Group Limited (NASDAQ:GOGL), Douglas Dynamics Inc (NYSE:PLOW), and Star Bulk Carriers Corp. (NASDAQ:SBLK). This group of stocks’ market valuations are similar to JKS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RTEC | 8 | 93352 | -4 |
| GOGL | 7 | 185539 | -1 |
| PLOW | 7 | 9945 | -4 |
| SBLK | 11 | 449409 | -4 |
| Average | 8.25 | 184561 | -3.25 |
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 $185 million. That figure was $18 million in JKS’s case. Star Bulk Carriers Corp. (NASDAQ:SBLK) is the most popular stock in this table. On the other hand Golden Ocean Group Limited (NASDAQ:GOGL) is the least popular one with only 7 bullish hedge fund positions. JinkoSolar Holding Co., Ltd. (NYSE:JKS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately JKS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); JKS investors were disappointed as the stock returned -26.5% 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.
