It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Momo Inc (NASDAQ:MOMO) and compare its performance against hedge funds’ favorite stocks.
Is Momo Inc (NASDAQ:MOMO) a first-rate investment right now? The best stock pickers are in an optimistic mood. The number of bullish hedge fund bets went up by 5 in recent months. Our calculations also showed that MOMO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). MOMO was in 27 hedge funds’ portfolios at the end of the third quarter of 2019. There were 22 hedge funds in our database with MOMO holdings at the end of the previous quarter.
To most stock holders, hedge funds are viewed as underperforming, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation today, Our researchers choose to focus on the crème de la crème of this group, around 750 funds. It is estimated that this group of investors command most of the smart money’s total asset base, and by watching their highest performing investments, Insider Monkey has unearthed numerous investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Kerr Neilson of Platinum Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to take a gander at the fresh hedge fund action encompassing Momo Inc (NASDAQ:MOMO).
Hedge fund activity in Momo Inc (NASDAQ:MOMO)
At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MOMO over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Momo Inc (NASDAQ:MOMO) was held by Renaissance Technologies, which reported holding $415.4 million worth of stock at the end of September. It was followed by Platinum Asset Management with a $122.9 million position. Other investors bullish on the company included Yiheng Capital, Bloom Tree Partners, and Kylin Management. In terms of the portfolio weights assigned to each position Kylin Management allocated the biggest weight to Momo Inc (NASDAQ:MOMO), around 13.28% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, earmarking 11.64 percent of its 13F equity portfolio to MOMO.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Hillhouse Capital Management, managed by Lei Zhang, established the biggest position in Momo Inc (NASDAQ:MOMO). Hillhouse Capital Management had $42.9 million invested in the company at the end of the quarter. James Dinan’s York Capital Management also initiated a $16.7 million position during the quarter. The other funds with brand new MOMO positions are Run Ye, Junji Takegami and Hoyon Hwang’s Tiger Pacific Capital, Fang Zheng’s Keywise Capital Management, and Panayotis Takis Sparaggis’s Alkeon Capital Management.
Let’s check out hedge fund activity in other stocks similar to Momo Inc (NASDAQ:MOMO). We will take a look at Israel Chemicals Ltd. (NYSE:ICL), Sealed Air Corporation (NYSE:SEE), Haemonetics Corporation (NYSE:HAE), and Entegris Inc (NASDAQ:ENTG). This group of stocks’ market valuations resemble MOMO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICL | 5 | 21431 | -1 |
| SEE | 32 | 950679 | 5 |
| HAE | 21 | 601291 | -2 |
| ENTG | 26 | 807428 | 2 |
| Average | 21 | 595207 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $595 million. That figure was $827 million in MOMO’s case. Sealed Air Corporation (NYSE:SEE) is the most popular stock in this table. On the other hand Israel Chemicals Ltd. (NYSE:ICL) is the least popular one with only 5 bullish hedge fund positions. Momo Inc (NASDAQ:MOMO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on MOMO as the stock returned 43.2% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
