Is Trip.com Group Limited (TCOM) A Good Stock To Buy?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Trip.com Group Limited (NASDAQ:TCOM) changed recently.

Is Trip.com Group Limited (NASDAQ:TCOM) going to take off soon? The smart money was becoming hopeful. The number of long hedge fund positions rose by 6 recently. Trip.com Group Limited (NASDAQ:TCOM) was in 41 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 67. Our calculations also showed that TCOM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Kerr Neilson of Platinum Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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. With all of this in mind let’s take a look at the recent hedge fund action regarding Trip.com Group Limited (NASDAQ:TCOM).

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

At the end of the second quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the first quarter of 2020. By comparison, 29 hedge funds held shares or bullish call options in TCOM a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in Trip.com Group Limited (NASDAQ:TCOM), which was worth $329.3 million at the end of the second quarter. On the second spot was Platinum Asset Management which amassed $272.1 million worth of shares. Alkeon Capital Management, Pzena Investment Management, and Kontiki Capital 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 Kadensa Capital allocated the biggest weight to Trip.com Group Limited (NASDAQ:TCOM), around 33.79% of its 13F portfolio. Kontiki Capital is also relatively very bullish on the stock, setting aside 21.85 percent of its 13F equity portfolio to TCOM.

As industrywide interest jumped, key money managers were breaking ground themselves. Kadensa Capital, managed by Leung Chi Kit, initiated the most outsized position in Trip.com Group Limited (NASDAQ:TCOM). Kadensa Capital had $22.1 million invested in the company at the end of the quarter. John W. Rogers’s Ariel Investments also made a $20.9 million investment in the stock during the quarter. The other funds with brand new TCOM positions are John Hurley’s Cavalry Asset Management, Steve Cohen’s Point72 Asset Management, and George Soros’s Soros Fund Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Trip.com Group Limited (NASDAQ:TCOM) but similarly valued. We will take a look at MongoDB, Inc. (NASDAQ:MDB), CGI Inc. (NYSE:GIB), The Clorox Company (NYSE:CLX), Imperial Oil Limited (NYSE:IMO), Teradyne, Inc. (NASDAQ:TER), The Hartford Financial Services Group Inc (NYSE:HIG), and DISH Network Corp. (NASDAQ:DISH). This group of stocks’ market caps match TCOM’s market cap.

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As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $1243 million. That figure was $1998 million in TCOM’s case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 14 bullish hedge fund positions. Trip.com Group Limited (NASDAQ:TCOM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TCOM is 64.8. 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately TCOM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TCOM were disappointed as the stock returned -10.7% since the end of June (through 10/11) 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 many of these stocks already outperformed the market since 2019.

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