Trip.com Group Limited (TCOM) Fell Out Of Favor With Hedge Funds

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Trip.com Group Limited (NASDAQ:TCOM).

Is Trip.com Group Limited (NASDAQ:TCOM) a good investment now? Hedge funds were taking a bearish view. The number of long hedge fund bets were cut by 5 recently. Trip.com Group Limited (NASDAQ:TCOM) was in 36 hedge funds’ portfolios at the end of September. 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 Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let’s go over the recent hedge fund action encompassing Trip.com Group Limited (NASDAQ:TCOM).

Kerr Neilson of Platinum Asset Management

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

At the end of September, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in TCOM a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Platinum Asset Management, managed by Kerr Neilson, holds the most valuable position in Trip.com Group Limited (NASDAQ:TCOM). Platinum Asset Management has a $319 million position in the stock, comprising 9% of its 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, led by Ken Fisher, holding a $272.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining peers with similar optimism encompass Richard S. Pzena’s Pzena Investment Management, GregardáHeje’s Kontiki Capital and Panayotis Takis Sparaggis’s Alkeon Capital Management. In terms of the portfolio weights assigned to each position Kontiki Capital allocated the biggest weight to Trip.com Group Limited (NASDAQ:TCOM), around 23.7% of its 13F portfolio. Kadensa Capital is also relatively very bullish on the stock, earmarking 11.99 percent of its 13F equity portfolio to TCOM.

Judging by the fact that Trip.com Group Limited (NASDAQ:TCOM) has experienced bearish sentiment from the smart money, we can see that there lies a certain “tier” of hedgies that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, Andrew Weiss’s Weiss Asset Management said goodbye to the largest investment of the 750 funds watched by Insider Monkey, valued at close to $63.5 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund sold off about $57 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Trip.com Group Limited (NASDAQ:TCOM). These stocks are Insulet Corporation (NASDAQ:PODD), AMC Entertainment Holdings Inc (NYSE:AMC), DraftKings Inc. (NASDAQ:DKNG), FirstEnergy Corp. (NYSE:FE), Broadridge Financial Solutions, Inc. (NYSE:BR), SK Telecom Co., Ltd. (NYSE:SKM), and Halliburton Company (NYSE:HAL). This group of stocks’ market values resemble TCOM’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $852 million. That figure was $1794 million in TCOM’s case. FirstEnergy Corp. (NYSE:FE) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 6 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 63. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 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 -10.6% since the end of September (through 11/30) 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.