It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized in financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Qihoo 360 Technology Co Ltd (NYSE:QIHU).
Is Qihoo 360 Technology Co Ltd (NYSE:QIHU) ready to rally soon? Prominent investors are becoming less confident. The number of bullish hedge fund positions fell by 13 lately. At the end of this article we will also compare QIHU to other stocks including Mid America Apartment Communities Inc (NYSE:MAA), Rite Aid Corporation (NYSE:RAD), and Zayo Group Holdings Inc (NYSE:ZAYO) to get a better sense of its popularity.
In the financial world there are dozens of signals market participants have at their disposal to value publicly traded companies. A pair of the best signals is composed of hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best investment managers can outperform the S&P 500 by a healthy margin (see the details here).
Keeping this in mind, we’re going to take a look at the key action encompassing Qihoo 360 Technology Co Ltd (NYSE:QIHU).
How are hedge funds trading Qihoo 360 Technology Co Ltd (NYSE:QIHU)?
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -41% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exist a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Rob Citrone’s Discovery Capital Management has the most valuable position in Qihoo 360 Technology Co Ltd (NYSE:QIHU), worth close to $99.3 million, corresponding to 1.1% of its total 13F portfolio. Sitting at the No. 2 spot is Kylin Management, led by Ted Kang, holding a $52.8 million position; the fund has 5.6% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism include Kenneth Tropin’s Graham Capital Management, Daniel S. Och’s OZ Management and D. E. Shaw’s D E Shaw.
Due to the fact that Qihoo 360 Technology Co Ltd (NYSE:QIHU) has faced a declination in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers who sold off their entire stakes in the third quarter. It’s worth mentioning that Karthik Sarma’s SRS Investment Management said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising about $75.5 million in stock. Christopher R. Hansen’s fund, Valiant Capital, also dumped its stock, about $69.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 13 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Qihoo 360 Technology Co Ltd (NYSE:QIHU). We will take a look at Mid America Apartment Communities Inc (NYSE:MAA), Rite Aid Corporation (NYSE:RAD), Zayo Group Holdings Inc (NYSE:ZAYO), and Fluor Corporation (NEW) (NYSE:FLR). This group of stocks’ market valuations are similar to QIHU’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MAA | 18 | 248346 | 2 |
| RAD | 46 | 1003793 | -9 |
| ZAYO | 22 | 344508 | 1 |
| FLR | 25 | 213843 | -4 |
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $453 million. That figure was $285 million in QIHU’s case. Rite Aid Corporation (NYSE:RAD) is the most popular stock in this table. The least popular one is Mid America Apartment Communities Inc (NYSE:MAA). Qihoo 360 Technology Co Ltd (NYSE:QIHU), with 19 bullish hedge fund positions is not the least popular stock in this group, but still it has not attracted much attention from investors. This may indicate that this is not a good buying opportunity; therefore, we’d rather spend our time focusing on stocks that hedge funds are most collectively bullish on, such as RAD in this particular case.
