Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about NetEase, Inc (NASDAQ:NTES).
Is NetEase, Inc (NASDAQ:NTES) a healthy stock for your portfolio? Prominent investors are getting more optimistic. The number of long hedge fund positions inched up by 3 recently. Our calculations also showed that ntes isn’t among the 30 most popular stocks among hedge funds.
According to most market participants, hedge funds are viewed as underperforming, outdated investment vehicles of the past. While there are over 8000 funds with their doors open at present, Our researchers hone in on the masters of this club, about 750 funds. Most estimates calculate that this group of people have their hands on the lion’s share of the smart money’s total capital, and by shadowing their first-class picks, Insider Monkey has unearthed several investment strategies that have historically outstripped the market. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Cliff Asness of AQR Capital Management
We’re going to go over the recent hedge fund action encompassing NetEase, Inc (NASDAQ:NTES).
How have hedgies been trading NetEase, Inc (NASDAQ:NTES)?
At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in NTES a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Orbis Investment Management was the largest shareholder of NetEase, Inc (NASDAQ:NTES), with a stake worth $2554.4 million reported as of the end of March. Trailing Orbis Investment Management was Steadfast Capital Management, which amassed a stake valued at $274.8 million. Fisher Asset Management, Alkeon Capital Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key money managers have been driving this bullishness. Tiger Pacific Capital, managed by Run Ye, Junji Takegami and Hoyon Hwang, initiated the most valuable position in NetEase, Inc (NASDAQ:NTES). Tiger Pacific Capital had $15 million invested in the company at the end of the quarter. Frank Slattery’s Symmetry Peak Management also initiated a $3.1 million position during the quarter. The following funds were also among the new NTES investors: James Dondero’s Highland Capital Management, Paul Hondros’s AlphaOne Capital Partners, and David Kowitz and Sheldon Kasowitz’s Indus Capital.
Let’s check out hedge fund activity in other stocks similar to NetEase, Inc (NASDAQ:NTES). We will take a look at Square, Inc. (NYSE:SQ), Canon Inc. (NYSE:CAJ), The Allstate Corporation (NYSE:ALL), and LyondellBasell Industries NV (NYSE:LYB). This group of stocks’ market caps resemble NTES’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SQ | 50 | 1399349 | 15 |
| CAJ | 7 | 93211 | 1 |
| ALL | 36 | 1776463 | 2 |
| LYB | 36 | 1695047 | -1 |
| Average | 32.25 | 1241018 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1241 million. That figure was $3366 million in NTES’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 7 bullish hedge fund positions. NetEase, Inc (NASDAQ:NTES) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on NTES as the stock returned 3.5% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
