Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Niu Technologies (NASDAQ:NIU) to find out whether it was one of their high conviction long-term ideas.
Is Niu Technologies (NASDAQ:NIU) the right pick for your portfolio? Investors who are in the know are in a bearish mood. The number of long hedge fund bets went down by 1 recently. Our calculations also showed that NIU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). NIU was in 5 hedge funds’ portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with NIU holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a look at the fresh hedge fund action regarding Niu Technologies (NASDAQ:NIU).
How are hedge funds trading Niu Technologies (NASDAQ:NIU)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the second quarter of 2019. By comparison, 0 hedge funds held shares or bullish call options in NIU a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Niu Technologies (NASDAQ:NIU) was held by Yiheng Capital, which reported holding $29.9 million worth of stock at the end of September. It was followed by Serenity Capital with a $5.2 million position. Other investors bullish on the company included Renaissance Technologies, Springbok Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Yiheng Capital allocated the biggest weight to Niu Technologies (NASDAQ:NIU), around 3.65% of its 13F portfolio. Serenity Capital is also relatively very bullish on the stock, designating 1.2 percent of its 13F equity portfolio to NIU.
Because Niu Technologies (NASDAQ:NIU) has faced declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedgies who sold off their positions entirely by the end of the third quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace said goodbye to the largest stake of the 750 funds watched by Insider Monkey, totaling an estimated $0.2 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also cut its stock, about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Niu Technologies (NASDAQ:NIU). We will take a look at Myers Industries, Inc. (NYSE:MYE), Rubius Therapeutics, Inc. (NASDAQ:RUBY), Pzena Investment Management Inc (NYSE:PZN), and KNOT Offshore Partners LP (NYSE:KNOP). This group of stocks’ market values are similar to NIU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MYE | 12 | 98711 | -2 |
| RUBY | 5 | 11603 | 0 |
| PZN | 7 | 20337 | 1 |
| KNOP | 3 | 21086 | -2 |
| Average | 6.75 | 37934 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $36 million in NIU’s case. Myers Industries, Inc. (NYSE:MYE) is the most popular stock in this table. On the other hand KNOT Offshore Partners LP (NYSE:KNOP) is the least popular one with only 3 bullish hedge fund positions. Niu Technologies (NASDAQ:NIU) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on NIU, though not to the same extent, as the stock returned 6.4% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.