Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Cheetah Mobile Inc (NYSE:CMCM), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Cheetah Mobile Inc (NYSE:CMCM) has seen a decrease in support from the world’s most elite money managers in recent months. CMCM was in 4 hedge funds’ portfolios at the end of September. There were 6 hedge funds in our database with CMCM positions at the end of the previous quarter. Our calculations also showed that CMCM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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. We even check out this option genius’ weekly trade ideas. 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 already gained 20 percent. With all of this in mind let’s take a glance at the recent hedge fund action encompassing Cheetah Mobile Inc (NYSE:CMCM).
How are hedge funds trading Cheetah Mobile Inc (NYSE:CMCM)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CMCM over the last 17 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in Cheetah Mobile Inc (NYSE:CMCM), worth close to $4 million, amounting to less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Ken Griffin of Citadel Investment Group, with a $2.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers with similar optimism consist of David E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Cheetah Mobile Inc (NYSE:CMCM), around 0.0033% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, setting aside 0.0022 percent of its 13F equity portfolio to CMCM.
Due to the fact that Cheetah Mobile Inc (NYSE:CMCM) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there were a few money managers that elected to cut their full holdings in the third quarter. Interestingly, Philippe Laffont’s Coatue Management sold off the biggest stake of all the hedgies monitored by Insider Monkey, comprising about $0 million in stock. Simon Sadler’s fund, Segantii Capital, also sold off its stock, about $0 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Cheetah Mobile Inc (NYSE:CMCM). We will take a look at Heritage Commerce Corp. (NASDAQ:HTBK), Barings BDC, Inc. (NYSE:BBDC), Amalgamated Bank (NASDAQ:AMAL), and Energy Recovery, Inc. (NASDAQ:ERII). This group of stocks’ market caps are similar to CMCM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HTBK | 9 | 26610 | 1 |
| BBDC | 10 | 29682 | -3 |
| AMAL | 12 | 60603 | 5 |
| ERII | 10 | 47610 | 0 |
| Average | 10.25 | 41126 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $9 million in CMCM’s case. Amalgamated Bank (NASDAQ:AMAL) is the most popular stock in this table. On the other hand Heritage Commerce Corp. (NASDAQ:HTBK) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Cheetah Mobile Inc (NYSE:CMCM) is even less popular than HTBK. Hedge funds dodged a bullet by taking a bearish stance towards CMCM. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CMCM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CMCM investors were disappointed as the stock returned -6.7% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
