With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Futu Holdings Limited (NASDAQ:FUTU).
Futu Holdings Limited (NASDAQ:FUTU) investors should be aware of an increase in enthusiasm from smart money recently. Futu Holdings Limited (NASDAQ:FUTU) was in 31 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FUTU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 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.
Chase Coleman of Tiger Global
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 EV 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. With all of this in mind let’s take a glance at the new hedge fund action regarding Futu Holdings Limited (NASDAQ:FUTU).
Do Hedge Funds Think FUTU Is A Good Stock To Buy Now?
At second quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FUTU over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Chase Coleman’s Tiger Global Management LLC has the number one position in Futu Holdings Limited (NASDAQ:FUTU), worth close to $621.1 million, accounting for 1.2% of its total 13F portfolio. Sitting at the No. 2 spot is PEAK6 Capital Management, managed by Matthew Hulsizer, which holds a $102.6 million call position; 0.2% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism consist of John Overdeck and David Siegel’s Two Sigma Advisors, and Shashin Shah’s Think Investments. In terms of the portfolio weights assigned to each position IvyRock Asset Management allocated the biggest weight to Futu Holdings Limited (NASDAQ:FUTU), around 43.46% of its 13F portfolio. Think Investments is also relatively very bullish on the stock, designating 11.2 percent of its 13F equity portfolio to FUTU.
As aggregate interest increased, key money managers have been driving this bullishness. Light Street Capital, managed by Glen Kacher, established the largest position in Futu Holdings Limited (NASDAQ:FUTU). Light Street Capital had $69.4 million invested in the company at the end of the quarter. Andrew Dalrymple and Barry McCorkell’s Aubrey Capital Management also initiated a $29.8 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Daniel Sundheim’s D1 Capital Partners, and D. E. Shaw’s D E Shaw.
Let’s now take a look at hedge fund activity in other stocks similar to Futu Holdings Limited (NASDAQ:FUTU). We will take a look at Tencent Music Entertainment Group (NYSE:TME), Etsy Inc (NASDAQ:ETSY), Generac Holdings Inc. (NYSE:GNRC), Slack Technologies Inc (NYSE:WORK), Hormel Foods Corporation (NYSE:HRL), Weyerhaeuser Co. (NYSE:WY), and Kansas City Southern (NYSE:KSU). All of these stocks’ market caps resemble FUTU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TME | 35 | 570093 | -28 |
| ETSY | 47 | 1731703 | -6 |
| GNRC | 38 | 594282 | 2 |
| WORK | 61 | 5328202 | 1 |
| HRL | 24 | 562433 | -2 |
| WY | 39 | 662871 | 1 |
| KSU | 61 | 3303297 | 12 |
| Average | 43.6 | 1821840 | -2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 43.6 hedge funds with bullish positions and the average amount invested in these stocks was $1822 million. That figure was $1190 million in FUTU’s case. Slack Technologies Inc (NYSE:WORK) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 24 bullish hedge fund positions. Futu Holdings Limited (NASDAQ:FUTU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FUTU is 49.5. 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 negative signal and 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 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately FUTU wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); FUTU investors were disappointed as the stock returned -64.4% since the end of June (through 10/15) 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 most of these stocks already outperformed the market in 2021.
Follow Futu Holdings Ltd (NASDAQ:FUTU)
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Disclosure: None. This article was originally published at Insider Monkey.
