Is JMIA A Good Stock To Buy Now?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Jumia Technologies AG (NYSE:JMIA) changed recently.

Is JMIA a good stock to buy now? a first-rate investment right now? Money managers were turning bullish. The number of long hedge fund bets went up by 1 recently. Jumia Technologies AG (NYSE:JMIA) was in 9 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that JMIA 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Christian Leone of Luxor Capital Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now let’s take a glance at the fresh hedge fund action regarding Jumia Technologies AG (NYSE:JMIA).

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

At third quarter’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in JMIA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

More specifically, Point72 Asset Management was the largest shareholder of Jumia Technologies AG (NYSE:JMIA), with a stake worth $5.6 million reported as of the end of September. Trailing Point72 Asset Management was Citadel Investment Group, which amassed a stake valued at $4.9 million. Luxor Capital Group, Citadel Investment Group, and PEAK6 Capital Management 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 Luxor Capital Group allocated the biggest weight to Jumia Technologies AG (NYSE:JMIA), around 0.03% of its 13F portfolio. Point72 Asset Management is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to JMIA.

Consequently, key money managers have been driving this bullishness. Luxor Capital Group, managed by Christian Leone, initiated the most outsized position in Jumia Technologies AG (NYSE:JMIA). Luxor Capital Group had $1.6 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management and D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Jumia Technologies AG (NYSE:JMIA) but similarly valued. These stocks are Precigen, Inc. (NASDAQ:PGEN), Global Medical REIT Inc. (NYSE:GMRE), Hyster-Yale Materials Handling Inc (NYSE:HY), Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH), MYR Group Inc (NASDAQ:MYRG), Omeros Corporation (NASDAQ:OMER), and Forrester Research, Inc. (NASDAQ:FORR). This group of stocks’ market caps are closest to JMIA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $14 million in JMIA’s case. Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) is the most popular stock in this table. On the other hand Global Medical REIT Inc. (NYSE:GMRE) is the least popular one with only 6 bullish hedge fund positions. Jumia Technologies AG (NYSE:JMIA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JMIA is 43.5. 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. A small number of hedge funds were also right about betting on JMIA as the stock returned 344.3% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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