Is HDB Stock A Buy or Sell?

In this article we will analyze whether HDFC Bank Limited (NYSE:HDB) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is HDB stock a buy? The best stock pickers were cutting their exposure. The number of long hedge fund bets decreased by 3 in recent months. HDFC Bank Limited (NYSE:HDB) was in 31 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 42. Our calculations also showed that HDB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. With all of this in mind let’s go over the new hedge fund action regarding HDFC Bank Limited (NYSE:HDB).

Do Hedge Funds Think HDB Is A Good Stock To Buy Now?

At the end of December, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the third quarter of 2020. By comparison, 39 hedge funds held shares or bullish call options in HDB a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

More specifically, Fisher Asset Management was the largest shareholder of HDFC Bank Limited (NYSE:HDB), with a stake worth $414.7 million reported as of the end of December. Trailing Fisher Asset Management was Steadfast Capital Management, which amassed a stake valued at $291.4 million. Two Creeks Capital Management, Impax Asset Management, and Driehaus Capital 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 Two Creeks Capital Management allocated the biggest weight to HDFC Bank Limited (NYSE:HDB), around 14.38% of its 13F portfolio. Aubrey Capital Management is also relatively very bullish on the stock, designating 6.9 percent of its 13F equity portfolio to HDB.

Due to the fact that HDFC Bank Limited (NYSE:HDB) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there were a few hedgies that decided to sell off their positions entirely last quarter. It’s worth mentioning that Robert Pohly’s Samlyn Capital dumped the largest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $27.9 million in stock. Patrick Degorce’s fund, Theleme Partners, also said goodbye to its stock, about $20 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to HDFC Bank Limited (NYSE:HDB). These stocks are Charter Communications, Inc. (NASDAQ:CHTR), AstraZeneca plc (NYSE:AZN), Philip Morris International Inc. (NYSE:PM), Citigroup Inc. (NYSE:C), Starbucks Corporation (NASDAQ:SBUX), Sony Corporation (NYSE:SNE), and Wells Fargo & Company (NYSE:WFC). This group of stocks’ market values resemble HDB’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 67.4 hedge funds with bullish positions and the average amount invested in these stocks was $5734 million. That figure was $1535 million in HDB’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand Sony Corporation (NYSE:SNE) is the least popular one with only 28 bullish hedge fund positions. HDFC Bank Limited (NYSE:HDB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HDB is 26.3. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and surpassed the market again by 1.5 percentage points. Unfortunately HDB wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); HDB investors were disappointed as the stock returned -4.6% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.

Follow Insider Monkey on Twitter