Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards 58.com Inc (ADR) (NYSE:WUBA).
Is 58.com Inc (ADR) (NYSE:WUBA) a healthy stock for your portfolio? Money managers are in a bearish mood. The number of bullish hedge fund bets decreased by 6 recently. WUBA was in 23 hedge funds’ portfolios at the end of the third quarter of 2016. There were 29 hedge funds in our database with WUBA holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Zillow Inc (NASDAQ:Z), Pilgrim’s Pride Corporation (NASDAQ:PPC), and Align Technology, Inc. (NASDAQ:ALGN) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, let’s take a look at the latest action regarding 58.com Inc (ADR) (NYSE:WUBA).
Hedge fund activity in 58.com Inc (ADR) (NYSE:WUBA)
At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the previous quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Lei Zhang’s Hillhouse Capital Management has the biggest position in 58.com Inc (ADR) (NYSE:WUBA), worth close to $264.5 million, corresponding to 5.4% of its total 13F portfolio. The second most bullish fund manager is Platinum Asset Management, led by Kerr Neilson, holding a $173.5 million position; the fund has 4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions consist of J Kevin Kenny Jr’s Emerging Sovereign Group, Daniel S. Och’s OZ Management and Wang Chen’s Serenity Capital.
Seeing as 58.com Inc (ADR) (NYSE:WUBA) has experienced bearish sentiment from the smart money, we can see that there is a sect of hedgies that decided to sell off their entire stakes heading into Q4. Interestingly, Josh Resnick’s Jericho Capital Asset Management dropped the biggest stake of all the hedgies followed by Insider Monkey, comprising about $42.5 million in stock, and Pasco Alfaro / Richard Tumure’s Miura Global Management was right behind this move, as the fund said goodbye to about $32.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to 58.com Inc (ADR) (NYSE:WUBA). These stocks are Zillow Inc (NASDAQ:Z), Pilgrim’s Pride Corporation (NASDAQ:PPC), Align Technology, Inc. (NASDAQ:ALGN), and CIT Group Inc. (NYSE:CIT). This group of stocks’ market caps match WUBA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| Z | 26 | 614342 | 0 |
| PPC | 21 | 235777 | 1 |
| ALGN | 37 | 589442 | 11 |
| CIT | 28 | 1312081 | -2 |
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 $688 million. That figure was $1038 million in WUBA’s case. Align Technology, Inc. (NASDAQ:ALGN) is the most popular stock in this table. On the other hand Pilgrim’s Pride Corporation (NASDAQ:PPC) is the least popular one with only 21 bullish hedge fund positions. 58.com Inc (ADR) (NYSE:WUBA) 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. In this regard ALGN might be a better candidate to consider a long position.
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