Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about GDS Holdings Limited (NASDAQ:GDS) in this article.
Is GDS a good stock to buy now? The best stock pickers were getting more optimistic. The number of long hedge fund positions moved up by 4 in recent months. GDS Holdings Limited (NASDAQ:GDS) was in 47 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 43. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GDS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 43 hedge funds in our database with GDS holdings at the end of June.
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a look at the recent hedge fund action regarding GDS Holdings Limited (NASDAQ:GDS).
Do Hedge Funds Think GDS Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GDS over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, 12 West Capital Management, managed by Joel Ramin, holds the most valuable position in GDS Holdings Limited (NASDAQ:GDS). 12 West Capital Management has a $817.3 million position in the stock, comprising 39.8% of its 13F portfolio. The second most bullish fund manager is Tiger Global Management LLC, led by Chase Coleman, holding a $468.9 million position; 1.3% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish contain Rajiv Jain’s GQG Partners, Lei Zhang’s Hillhouse Capital Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position 12 West Capital Management allocated the biggest weight to GDS Holdings Limited (NASDAQ:GDS), around 39.77% of its 13F portfolio. Kylin Management is also relatively very bullish on the stock, dishing out 30.41 percent of its 13F equity portfolio to GDS.
As industrywide interest jumped, key hedge funds were breaking ground themselves. GQG Partners, managed by Rajiv Jain, established the largest position in GDS Holdings Limited (NASDAQ:GDS). GQG Partners had $296.8 million invested in the company at the end of the quarter. Simon Sadler’s Segantii Capital also made a $29 million investment in the stock during the quarter. The other funds with brand new GDS positions are James Thomas Berylson’s Berylson Capital Partners, Bernard Lambilliotte’s Ecofin Ltd, and Bruce Kovner’s Caxton Associates LP.
Let’s now review hedge fund activity in other stocks similar to GDS Holdings Limited (NASDAQ:GDS). We will take a look at Sociedad Quimica y Minera (NYSE:SQM), The Scotts Miracle-Gro Company (NYSE:SMG), A. O. Smith Corporation (NYSE:AOS), Universal Display Corporation (NASDAQ:OLED), Globe Life Inc. (NYSE:GL), MGM Growth Properties LLC (NYSE:MGP), and Five9 Inc (NASDAQ:FIVN). All of these stocks’ market caps match GDS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SQM | 12 | 115706 | -2 |
| SMG | 31 | 292026 | 1 |
| AOS | 30 | 435487 | -5 |
| OLED | 20 | 95777 | -5 |
| GL | 31 | 751195 | -2 |
| MGP | 30 | 470854 | -2 |
| FIVN | 47 | 1328168 | 3 |
| Average | 28.7 | 498459 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $498 million. That figure was $2723 million in GDS’s case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand Sociedad Quimica y Minera (NYSE:SQM) is the least popular one with only 12 bullish hedge fund positions. GDS Holdings Limited (NASDAQ:GDS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GDS is 89. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on GDS as the stock returned 11.7% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
