Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 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 LAIX Inc. (NYSE:LAIX) in this article.
Is LAIX a good stock to buy? LAIX Inc. (NYSE:LAIX) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. LAIX Inc. (NYSE:LAIX) was in 3 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 4. Our calculations also showed that LAIX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the eyes of most traders, hedge funds are perceived as underperforming, outdated financial vehicles of yesteryear. While there are more than 8000 funds in operation at present, We look at the top tier of this club, about 850 funds. These money managers preside over bulk of the hedge fund industry’s total capital, and by shadowing their inimitable stock picks, Insider Monkey has deciphered many investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to analyze the key hedge fund action surrounding LAIX Inc. (NYSE:LAIX).
Do Hedge Funds Think LAIX Is A Good Stock To Buy Now?
At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the fourth quarter of 2020. On the other hand, there were a total of 1 hedge funds with a bullish position in LAIX a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in LAIX Inc. (NYSE:LAIX) was held by Renaissance Technologies, which reported holding $0.8 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $0.1 million position. The only other hedge fund that is bullish on the company was Two Sigma Advisors.
Now, key money managers were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the biggest position in LAIX Inc. (NYSE:LAIX). Two Sigma Advisors had $0 million invested in the company at the end of the quarter.
Let’s check out hedge fund activity in other stocks similar to LAIX Inc. (NYSE:LAIX). These stocks are Check-Cap Ltd. (NASDAQ:CHEK), United States Antimony Corporation (NYSE:UAMY), ENGlobal Corp (NASDAQ:ENG), DLH Holdings Corp. (NASDAQ:DLHC), Geospace Technologies Corp (NASDAQ:GEOS), Galectin Therapeutics Inc. (NASDAQ:GALT), and Q&K International Group Limited (NASDAQ:QK). This group of stocks’ market caps are similar to LAIX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHEK | 1 | 244 | 0 |
| UAMY | 3 | 240 | 1 |
| ENG | 3 | 1292 | 0 |
| DLHC | 6 | 46235 | -2 |
| GEOS | 5 | 8506 | -3 |
| GALT | 3 | 791 | -1 |
| QK | 1 | 34 | 0 |
| Average | 3.1 | 8192 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.1 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $1 million in LAIX’s case. DLH Holdings Corp. (NASDAQ:DLHC) is the most popular stock in this table. On the other hand Check-Cap Ltd. (NASDAQ:CHEK) is the least popular one with only 1 bullish hedge fund positions. LAIX Inc. (NYSE:LAIX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LAIX is 48.5. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately LAIX wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); LAIX investors were disappointed as the stock returned -27.8% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Laix Inc. (NYSE:LAIX)
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Disclosure: None. This article was originally published at Insider Monkey.
