The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Momo Inc (ADR) (NASDAQ:MOMO) from the perspective of those successful funds.
Is Momo Inc (ADR) (NASDAQ:MOMO) ready to rally soon? The best stock pickers are genuinely betting on the stock. The number of long hedge fund positions that are disclosed in regulatory 13F filings strengthened by 10 lately. MOMO was in 19 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with MOMO positions at the end of the previous quarter. At the end of this article we will also compare MOMO to other stocks including Adeptus Health Inc (NYSE:ADPT), Arcos Dorados Holding Inc (NYSE:ARCO), and Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) to get a better sense of its popularity.
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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.
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With all of this in mind, we’re going to check out the new action surrounding Momo Inc (ADR) (NASDAQ:MOMO).
How are hedge funds trading Momo Inc (ADR) (NASDAQ:MOMO)?
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 111% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in MOMO heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lei Zhang’s Hillhouse Capital Management has the largest position in Momo Inc (ADR) (NASDAQ:MOMO), worth close to $105.7 million, corresponding to 2.2% of its total 13F portfolio. Sitting at the No. 2 spot is Eric Mindich of Eton Park Capital, with a $35 million position. Other members of the smart money that are bullish encompass Yi Xin’s Ariose Capital, and Larry Chen and Terry Zhang’s Tairen Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now, key hedge funds have been driving this bullishness. Eton Park Capital established the biggest position in Momo Inc (ADR) (NASDAQ:MOMO) which had $35 million invested in the company at the end of the quarter. Yi Xin’s Ariose Capital also initiated a $18.9 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies which is one of the largest hedge funds in the world, Israel Englander’s Millennium Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Momo Inc (ADR) (NASDAQ:MOMO) but similarly valued. We will take a look at Adeptus Health Inc (NYSE:ADPT), Arcos Dorados Holding Inc (NYSE:ARCO), Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), and EP Energy Corp (NYSE:EPE). All of these stocks’ market caps resemble MOMO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADPT | 13 | 183864 | -11 |
| ARCO | 15 | 34054 | 6 |
| ACHN | 27 | 348980 | 5 |
| EPE | 15 | 18169 | 2 |
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $234 million in MOMO’s case. Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) is the most popular stock in this table. On the other hand Adeptus Health Inc (NYSE:ADPT) is the least popular one with only 13 bullish hedge fund positions. Momo Inc (ADR) (NASDAQ:MOMO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ACHN might be a better candidate to consider taking a long position in.
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