In this article we will check out the progression of hedge fund sentiment towards GDS Holdings Limited (NASDAQ:GDS) 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 GDS Holdings Limited (NASDAQ:GDS) a buy right now? Prominent investors were taking an optimistic view. The number of bullish hedge fund positions rose by 1 recently. GDS Holdings Limited (NASDAQ:GDS) was in 40 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 47. Our calculations also showed that GDS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 39 hedge funds in our database with GDS holdings at the end of December.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Chase Coleman of Tiger Global
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 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. Now let’s check out the recent hedge fund action regarding GDS Holdings Limited (NASDAQ:GDS).
Do Hedge Funds Think GDS Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GDS over the last 23 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, 12 West Capital Management was the largest shareholder of GDS Holdings Limited (NASDAQ:GDS), with a stake worth $791.8 million reported as of the end of March. Trailing 12 West Capital Management was Tiger Global Management LLC, which amassed a stake valued at $298 million. Hillhouse Capital Management, Long Pond Capital, and D E Shaw 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 12 West Capital Management allocated the biggest weight to GDS Holdings Limited (NASDAQ:GDS), around 37.73% of its 13F portfolio. Kylin Management is also relatively very bullish on the stock, dishing out 16.57 percent of its 13F equity portfolio to GDS.
As industrywide interest jumped, some big names were leading the bulls’ herd. Long Pond Capital, managed by John Khoury, created the most valuable position in GDS Holdings Limited (NASDAQ:GDS). Long Pond Capital had $104.2 million invested in the company at the end of the quarter. David Thomas’s Atalan Capital also made a $31.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Matthew Hulsizer’s PEAK6 Capital Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as GDS Holdings Limited (NASDAQ:GDS) but similarly valued. These stocks are Entegris Inc (NASDAQ:ENTG), Eastman Chemical Company (NYSE:EMN), Franklin Resources, Inc. (NYSE:BEN), Westinghouse Air Brake Technologies Corporation (NYSE:WAB), China Southern Airlines Co Ltd (NYSE:ZNH), Solaredge Technologies Inc (NASDAQ:SEDG), and Bio-Techne Corporation (NASDAQ:TECH). This group of stocks’ market values match GDS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENTG | 23 | 1484733 | -7 |
| EMN | 27 | 162100 | -4 |
| BEN | 31 | 198221 | -2 |
| WAB | 40 | 2481343 | -5 |
| ZNH | 3 | 15588 | 0 |
| SEDG | 32 | 420741 | 4 |
| TECH | 23 | 411800 | -1 |
| Average | 25.6 | 739218 | -2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $739 million. That figure was $2080 million in GDS’s case. Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. GDS Holdings Limited (NASDAQ:GDS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GDS is 81.5. 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 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately GDS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GDS were disappointed as the stock returned -1.5% since the end of March (through 6/25) 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.
