Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze HDFC Bank Limited (ADR) (NYSE:HDB) from the perspective of those elite funds.
HDFC Bank Limited (ADR) (NYSE:HDB) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 23 hedge funds’ portfolios at the end of September. 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 BT Group plc (ADR) (NYSE:BT), Statoil ASA (ADR) (NYSE:STO), and ConocoPhillips (NYSE:COP) to gather more data points.
Follow H D F C Bank Ltd (NYSE:HDB)
Follow H D F C Bank Ltd (NYSE:HDB)
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.
Kevin George/Shutterstock.com
With all of this in mind, we’re going to check out the latest action regarding HDFC Bank Limited (ADR) (NYSE:HDB).
Hedge fund activity in HDFC Bank Limited (ADR) (NYSE:HDB)
Heading into the fourth quarter of 2016, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, run by Ken Fisher, holds the biggest position in HDFC Bank Limited (ADR) (NYSE:HDB). According to regulatory filings, the fund has a $586.6 million position in the stock, comprising 1% of its 13F portfolio. Sitting at the No. 2 spot is Stephen Mandel of Lone Pine Capital, with a $290.1 million position; 1.3% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish encompass Ryan Pedlow’s Two Creeks Capital Management, Richard Driehaus’s Driehaus Capital and Robert Pohly’s Samlyn Capital.
Due to the fact that HDFC Bank Limited (ADR) (NYSE:HDB) has witnessed unchanged interest from the smart money, we will take a look at a specific group of hedge funds who were dropping their positions entirely in the third quarter. Interestingly, John Armitage’s Egerton Capital Limited sold off the largest position of the 700 funds watched by Insider Monkey, comprising an estimated $135.6 million in stock, and John Brennan’s Sirios Capital Management was right behind this move, as the fund said goodbye to about $11.4 million worth of HDB shares. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as HDFC Bank Limited (ADR) (NYSE:HDB) but similarly valued. These stocks are BT Group plc (ADR) (NYSE:BT), Statoil ASA (ADR) (NYSE:STO), ConocoPhillips (NYSE:COP), and salesforce.com, inc. (NYSE:CRM). This group of stocks’ market valuations match HDB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BT | 7 | 114672 | -4 |
| STO | 10 | 85112 | 0 |
| COP | 40 | 1329333 | -3 |
| CRM | 66 | 2135618 | 6 |
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $916 million. That figure was $1.44 billion in HDB’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand BT Group plc (ADR) (NYSE:BT) is the least popular one with only 7 bullish hedge fund positions. HDFC Bank Limited (ADR) (NYSE:HDB) 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 CRM might be a better candidate to consider a long position.
Suggested Articles:
Countries With The Highest Migration Rates
Biggest Logistics Companies In the World
Best Paying Medical Jobs With Least Education
Disclosure: None
