A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 28, so let’s proceed with the discussion of the hedge fund sentiment on 360 Finance, Inc. (NASDAQ:QFIN).
360 Finance, Inc. (NASDAQ:QFIN) has experienced an increase in activity from the world’s largest hedge funds in recent months. QFIN was in 9 hedge funds’ portfolios at the end of the second quarter of 2019. There were 1 hedge funds in our database with QFIN holdings at the end of the previous quarter. Our calculations also showed that QFIN 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 look at the fresh hedge fund action encompassing 360 Finance, Inc. (NASDAQ:QFIN).
How are hedge funds trading 360 Finance, Inc. (NASDAQ:QFIN)?
At Q2’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 800% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards QFIN over the last 16 quarters. 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, D E Shaw was the largest shareholder of 360 Finance, Inc. (NASDAQ:QFIN), with a stake worth $2.9 million reported as of the end of March. Trailing D E Shaw was Hound Partners, which amassed a stake valued at $2 million. Millennium Management, Renaissance Technologies, and HBK Investments were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, assembled the most outsized position in 360 Finance, Inc. (NASDAQ:QFIN). D E Shaw had $2.9 million invested in the company at the end of the quarter. Jonathan Auerbach’s Hound Partners also initiated a $2 million position during the quarter. The following funds were also among the new QFIN investors: Renaissance Technologies, David Costen Haley’s HBK Investments, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as 360 Finance, Inc. (NASDAQ:QFIN) but similarly valued. These stocks are Forward Air Corporation (NASDAQ:FWRD), Dine Brands Global, Inc. (NYSE:DIN), Horace Mann Educators Corporation (NYSE:HMN), and Liberty Oilfield Services Inc. (NYSE:LBRT). 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 |
|---|---|---|---|
| FWRD | 18 | 102012 | 3 |
| DIN | 15 | 159846 | -5 |
| HMN | 12 | 30864 | -2 |
| LBRT | 7 | 68055 | -7 |
| Average | 13 | 90194 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $10 million in QFIN’s case. Forward Air Corporation (NASDAQ:FWRD) is the most popular stock in this table. On the other hand Liberty Oilfield Services Inc. (NYSE:LBRT) is the least popular one with only 7 bullish hedge fund positions. 360 Finance, Inc. (NASDAQ:QFIN) 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 QFIN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); QFIN investors were disappointed as the stock returned -24.3% 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.