The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Bitauto Hldg Ltd (ADR) (NYSE:BITA), and what that likely means for the prospects of the company and its stock.
Is Bitauto Hldg Ltd (ADR) (NYSE:BITA) an outstanding investment right now? The smart money is in a pessimistic mood. The number of bullish hedge fund bets dropped by 8 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Darling Ingredients Inc (NYSE:DAR), RSP Permian Inc (NYSE:RSPP), and West Corp (NASDAQ:WSTC) to gather more data points.
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At the moment, there are dozens of formulas market participants can use to value publicly traded companies. A couple of the most useful formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the top investment managers can beat the market by a solid amount (see the details here).
Keeping this in mind, we’re going to take a peek at the new action regarding Bitauto Hldg Ltd (ADR) (NYSE:BITA).
How are hedge funds trading Bitauto Hldg Ltd (ADR) (NYSE:BITA)?
Heading into Q4, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 47% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, OZ Management, managed by Daniel S. Och, holds the biggest position in Bitauto Hldg Ltd (ADR) (NYSE:BITA). OZ Management has a $68.4 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Cantillon Capital Management, led by William von Mueffling, holding a $59.3 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish comprise Rob Citrone’s Discovery Capital Management, Brian Ashford-Russell and Tim Woolley’s Polar Capital, and GLG Partners.
Since Bitauto Hldg Ltd (ADR) (NYSE:BITA) has faced a falling interest from the aggregate hedge fund industry, logic holds that there is a sect of hedgies who were dropping their entire stakes heading into Q4. Interestingly, OZ Management said goodbye to the largest position of all the hedgies tracked by Insider Monkey, totaling about $47 million in stock, and Philippe Laffont’s Coatue Management was right behind this move, as the fund sold off about $33.9 million worth of shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 8 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Bitauto Hldg Ltd (ADR) (NYSE:BITA) but similarly valued. These stocks are Darling Ingredients Inc. (NYSE:DAR), RSP Permian Inc (NYSE:RSPP), West Corp (NASDAQ:WSTC), and OM Asset Management PLC (NYSE:OMAM). This group of stocks’ market caps is similar to Bitauto Hldg Ltd (ADR) (NYSE:BITA)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DAR | 28 | 430223 | -5 |
| RSPP | 20 | 208298 | 1 |
| WSTC | 16 | 73353 | -7 |
| OMAM | 13 | 99404 | -1 |
As you can see, these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $203 million. That figure was $145 million in Bitauto Hldg Ltd (ADR) (BITA)’s case. Darling International Inc. (NYSE:DAR) is the most popular stock in this table. On the other hand, OM Asset Management PLC (NYSE:OMAM) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks, Bitauto Hldg Ltd (ADR) (NYSE:BITA) is even less popular than OM Asset Management PLC (NYSE:OMAM). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.
