Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Trip.com Group Limited (NASDAQ:CTRP) and compare its performance to hedge funds’ consensus picks in 2019.
Trip.com Group Limited (NASDAQ:CTRP) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that CTRP 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).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Talpins of Element Capital
We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his 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. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing Trip.com Group Limited (NASDAQ:CTRP).
What have hedge funds been doing with Trip.com Group Limited (NASDAQ:CTRP)?
At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from the second quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in CTRP a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Trip.com Group Limited (NASDAQ:CTRP), which was worth $304.6 million at the end of the third quarter. On the second spot was Kontiki Capital which amassed $88.9 million worth of shares. D E Shaw, Renaissance Technologies, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kontiki Capital allocated the biggest weight to Trip.com Group Limited (NASDAQ:CTRP), around 27.72% of its 13F portfolio. Kylin Management is also relatively very bullish on the stock, earmarking 7.84 percent of its 13F equity portfolio to CTRP.
As one would reasonably expect, key money managers have jumped into Trip.com Group Limited (NASDAQ:CTRP) headfirst. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in Trip.com Group Limited (NASDAQ:CTRP). Point72 Asset Management had $35.8 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also made a $22.4 million investment in the stock during the quarter. The other funds with new positions in the stock are James Dinan’s York Capital Management, Kerr Neilson’s Platinum Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Trip.com Group Limited (NASDAQ:CTRP) but similarly valued. We will take a look at Cheniere Energy, Inc. (NYSE:LNG), Shinhan Financial Group Co., Ltd. (NYSE:SHG), Avangrid, Inc. (NYSE:AGR), and Garmin Ltd. (NASDAQ:GRMN). This group of stocks’ market valuations are similar to CTRP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LNG | 40 | 3859554 | -3 |
| SHG | 4 | 8676 | -1 |
| AGR | 14 | 361586 | 2 |
| GRMN | 26 | 504128 | -6 |
| Average | 21 | 1183486 | -2 |
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 $1183 million. That figure was $877 million in CTRP’s case. Cheniere Energy, Inc. (NYSE:LNG) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 4 bullish hedge fund positions. Trip.com Group Limited (NASDAQ:CTRP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately CTRP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CTRP were disappointed as the stock returned -100% in 2019 (through December 23rd) 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 this year.
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.
