In this article we will check out the progression of hedge fund sentiment towards 360 DigiTech, Inc. (NASDAQ:QFIN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is 360 DigiTech, Inc. (NASDAQ:QFIN) a sound investment right now? Prominent investors were buying. The number of bullish hedge fund bets improved by 5 lately. 360 DigiTech, Inc. (NASDAQ:QFIN) was in 19 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that QFIN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 14 hedge funds in our database with QFIN positions at the end of the fourth quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Ken Griffin of Citadel Investment Group
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Do Hedge Funds Think QFIN Is A Good Stock To Buy Now?
At the end of March, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in QFIN over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GLG Partners held the most valuable stake in 360 DigiTech, Inc. (NASDAQ:QFIN), which was worth $25.1 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $15.6 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and Renaissance Technologies 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 Kadensa Capital allocated the biggest weight to 360 DigiTech, Inc. (NASDAQ:QFIN), around 2.32% of its 13F portfolio. Quaero Capital is also relatively very bullish on the stock, earmarking 1.45 percent of its 13F equity portfolio to QFIN.
As industrywide interest jumped, key money managers have been driving this bullishness. Kadensa Capital, managed by Leung Chi Kit, initiated the most outsized position in 360 DigiTech, Inc. (NASDAQ:QFIN). Kadensa Capital had $4.5 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $4 million investment in the stock during the quarter. The other funds with new positions in the stock are Philip Best’s Quaero Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as 360 DigiTech, Inc. (NASDAQ:QFIN) but similarly valued. These stocks are Asbury Automotive Group, Inc. (NYSE:ABG), Array Biopharma Inc (NASDAQ:ARRY), CONMED Corporation (NASDAQ:CNMD), Wingstop Inc (NASDAQ:WING), Tenable Holdings, Inc. (NASDAQ:TENB), Advantage Solutions Inc. (NASDAQ:ADV), and Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). This group of stocks’ market valuations are similar to QFIN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ABG | 20 | 903147 | -3 |
| ARRY | 30 | 486103 | 1 |
| CNMD | 23 | 236802 | -5 |
| WING | 23 | 233958 | -5 |
| TENB | 32 | 532519 | -7 |
| ADV | 24 | 605969 | 5 |
| AJRD | 30 | 786292 | -6 |
| Average | 26 | 540684 | -2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $541 million. That figure was $92 million in QFIN’s case. Tenable Holdings, Inc. (NASDAQ:TENB) is the most popular stock in this table. On the other hand Asbury Automotive Group, Inc. (NYSE:ABG) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks 360 DigiTech, Inc. (NASDAQ:QFIN) is even less popular than ABG. Our overall hedge fund sentiment score for QFIN is 40. 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. 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 23.8% in 2021 through July 16th but managed to beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on QFIN, though not to the same extent, as the stock returned 13.8% since the end of March (through July 16th) and outperformed the market as well.
Follow 360 Digitech Inc. (NASDAQ:QFIN)
Follow 360 Digitech Inc. (NASDAQ:QFIN)
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Disclosure: None. This article was originally published at Insider Monkey.
