Vipshop Holdings Limited (VIPS) Fell Out Of Favor With Hedge Funds

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Vipshop Holdings Limited (NYSE:VIPS)? The smart money sentiment can provide an answer to this question.

Vipshop Holdings Limited (NYSE:VIPS) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 54. VIPS investors should be aware of a decrease in activity from the world’s largest hedge funds of late. There were 36 hedge funds in our database with VIPS holdings at the end of June. Our calculations also showed that VIPS 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. Keeping this in mind we’re going to go over the fresh hedge fund action encompassing Vipshop Holdings Limited (NYSE:VIPS).

Lei Zhang of Hillhouse Capital Management

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

At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in VIPS a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Among these funds, D E Shaw held the most valuable stake in Vipshop Holdings Limited (NYSE:VIPS), which was worth $114 million at the end of the third quarter. On the second spot was Hillhouse Capital Management which amassed $99.9 million worth of shares. Half Sky Capital, Pentwater Capital Management, and Tiger Pacific 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 Half Sky Capital allocated the biggest weight to Vipshop Holdings Limited (NYSE:VIPS), around 19.8% of its 13F portfolio. Keywise Capital Management is also relatively very bullish on the stock, setting aside 10.11 percent of its 13F equity portfolio to VIPS.

Seeing as Vipshop Holdings Limited (NYSE:VIPS) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers who were dropping their entire stakes last quarter. At the top of the heap, George Yang’s Anatole Investment Management said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, totaling close to $183.6 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund sold off about $58.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 6 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Vipshop Holdings Limited (NYSE:VIPS). We will take a look at Tandem Diabetes Care Inc (NASDAQ:TNDM), Endeavor Group Holdings, Inc. (NYSE:EDR), BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), Autoliv Inc. (NYSE:ALV), YETI Holdings, Inc. (NYSE:YETI), BRP Inc. (NASDAQ:DOOO), and People’s United Financial, Inc. (NASDAQ:PBCT). This group of stocks’ market values match VIPS’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $815 million. That figure was $560 million in VIPS’s case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 16 bullish hedge fund positions. Vipshop Holdings Limited (NYSE:VIPS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VIPS is 62.3. 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 VIPS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VIPS were disappointed as the stock returned -12.3% 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.