Is The9 Limited (NCTY) A Good Stock To Buy?

In this article we will check out the progression of hedge fund sentiment towards The9 Limited (NASDAQ:NCTY) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is NCTY a good stock to buy? The9 Limited (NASDAQ:NCTY) shareholders have witnessed an increase in hedge fund sentiment lately. The9 Limited (NASDAQ:NCTY) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 1. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 1 hedge funds in our database with NCTY positions at the end of the fourth quarter. Our calculations also showed that NCTY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Today there are a multitude of formulas stock traders employ to value publicly traded companies. Two of the best formulas are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outpace their index-focused peers by a healthy margin (see the details here). 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 .

Sander Gerber of Hudson Bay Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $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. With all of this in mind let’s analyze the key hedge fund action regarding The9 Limited (NASDAQ:NCTY).

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

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 400% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in NCTY a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

The largest stake in The9 Limited (NASDAQ:NCTY) was held by Hudson Bay Capital Management, which reported holding $4.1 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $2 million position. Other investors bullish on the company included Point72 Asset Management, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Sabby Capital allocated the biggest weight to The9 Limited (NASDAQ:NCTY), around 0.1% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to NCTY.

As aggregate interest increased, some big names have been driving this bullishness. Hudson Bay Capital Management, managed by Sander Gerber, established the most outsized position in The9 Limited (NASDAQ:NCTY). Hudson Bay Capital Management had $4.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $2 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Israel Englander’s Millennium Management, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The9 Limited (NASDAQ:NCTY) but similarly valued. These stocks are Itamar Medical Ltd. (NASDAQ:ITMR), Bioceres Crop Solutions Corp. (NASDAQ:BIOX), Carter Bankshares, Inc. (NASDAQ:CARE), Global Water Resources, Inc. (NASDAQ:GWRS), Cadiz Inc (NASDAQ:CDZI), General Finance Corporation (NASDAQ:GFN), and National CineMedia, Inc. (NASDAQ:NCMI). This group of stocks’ market values are closest to NCTY’s market value.

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As you can see these stocks had an average of 7.7 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $9 million in NCTY’s case. Itamar Medical Ltd. (NASDAQ:ITMR) is the most popular stock in this table. On the other hand Global Water Resources, Inc. (NASDAQ:GWRS) is the least popular one with only 2 bullish hedge fund positions. The9 Limited (NASDAQ:NCTY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NCTY is 52.6. 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 17.4% in 2021 through June 18th and surpassed the market again by 6.1 percentage points. Unfortunately NCTY wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NCTY investors were disappointed as the stock returned -47.1% since the end of March (through 6/18) 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.

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