We at Insider Monkey have gone over 730 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article, we look at what those funds think of Secoo Holding Limited (NASDAQ:SECO) based on that data.
Is Secoo Holding Limited (NASDAQ:SECO) going to take off soon? Investors who are in the know are becoming less hopeful. The number of long hedge fund bets were trimmed by 1 in recent months. Our calculations also showed that SECO 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 peek at the recent hedge fund action encompassing Secoo Holding Limited (NASDAQ:SECO).
Hedge fund activity in Secoo Holding Limited (NASDAQ:SECO)
At Q2’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the first quarter of 2019. On the other hand, there were a total of 4 hedge funds with a bullish position in SECO a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Indus Capital held the most valuable stake in Secoo Holding Limited (NASDAQ:SECO), which was worth $10.7 million at the end of the second quarter. On the second spot was Pelham Capital which amassed $7 million worth of shares. Moreover, Renaissance Technologies, D E Shaw, and Millennium Management were also bullish on Secoo Holding Limited (NASDAQ:SECO), allocating a large percentage of their portfolios to this stock.
Due to the fact that Secoo Holding Limited (NASDAQ:SECO) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of money managers that decided to sell off their full holdings in the second quarter. Interestingly, Charles Davidson and Joseph Jacobs’s Wexford Capital said goodbye to the largest stake of the “upper crust” of funds watched by Insider Monkey, worth an estimated $1.1 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund dropped about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds in the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Secoo Holding Limited (NASDAQ:SECO) but similarly valued. These stocks are Regalwood Global Energy Ltd. (NYSE:RWGE), Vapotherm, Inc. (NYSE:VAPO), Spartan Motors Inc (NASDAQ:SPAR), and Evolus, Inc. (NASDAQ:EOLS). All of these stocks’ market caps resemble SECO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RWGE | 14 | 120281 | 0 |
| VAPO | 6 | 87293 | 1 |
| SPAR | 11 | 44244 | -4 |
| EOLS | 12 | 15398 | 6 |
| Average | 10.75 | 66804 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $19 million in SECO’s case. Regalwood Global Energy Ltd. (NYSE:RWGE) is the most popular stock in this table. On the other hand Vapotherm, Inc. (NYSE:VAPO) is the least popular one with only 6 bullish hedge fund positions. Secoo Holding Limited (NASDAQ:SECO) 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 SECO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SECO investors were disappointed as the stock returned -11.8% 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.