With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was QuantumScape Corporation (NYSE:QS).
Is QS a good stock to buy? Prominent investors were getting less bullish. The number of bullish hedge fund positions shrunk by 6 recently. QuantumScape Corporation (NYSE:QS) was in 29 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that QS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 35 hedge funds in our database with QS holdings at the end of December.
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Philippe Laffont of Coatue Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 take a gander at the latest hedge fund action surrounding QuantumScape Corporation (NYSE:QS).
Do Hedge Funds Think QS Is A Good Stock To Buy Now?
At the end of March, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in QS a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Soros Fund Management held the most valuable stake in QuantumScape Corporation (NYSE:QS), which was worth $148.3 million at the end of the fourth quarter. On the second spot was JS Capital which amassed $148.3 million worth of shares. Millennium Management, Islet Management, and Coatue 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 JS Capital allocated the biggest weight to QuantumScape Corporation (NYSE:QS), around 7.67% of its 13F portfolio. Soros Fund Management is also relatively very bullish on the stock, setting aside 2.78 percent of its 13F equity portfolio to QS.
Because QuantumScape Corporation (NYSE:QS) has faced falling interest from hedge fund managers, logic holds that there lies a certain “tier” of funds who sold off their entire stakes in the first quarter. Interestingly, Christian Leone’s Luxor Capital Group dumped the largest position of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $352.2 million in stock, and Tony Davis’s Inherent Group was right behind this move, as the fund said goodbye to about $104.5 million worth. These transactions are important to note, as total hedge fund interest was cut by 6 funds in the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as QuantumScape Corporation (NYSE:QS) but similarly valued. We will take a look at Sun Communities Inc (NYSE:SUI), Genuine Parts Company (NYSE:GPC), The Liberty SiriusXM Group (NASDAQ:LSXMA), Smith & Nephew plc (NYSE:SNN), Brookfield Property Partners LP (NYSE:BPY), Akamai Technologies, Inc. (NASDAQ:AKAM), and Cincinnati Financial Corporation (NASDAQ:CINF). This group of stocks’ market valuations are closest to QS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SUI | 35 | 1007911 | 8 |
| GPC | 26 | 357245 | 1 |
| LSXMA | 38 | 1727128 | -4 |
| SNN | 11 | 42029 | -1 |
| BPY | 17 | 205102 | 8 |
| AKAM | 25 | 206922 | -8 |
| CINF | 22 | 886358 | 2 |
| Average | 24.9 | 633242 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $633 million. That figure was $535 million in QS’s case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 11 bullish hedge fund positions. QuantumScape Corporation (NYSE:QS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for QS is 57.2. 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 positive signal but 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately QS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on QS were disappointed as the stock returned -40.3% since the end of March (through 7/2) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
