In this article we are going to use hedge fund sentiment as a tool and determine whether JD.Com Inc (NASDAQ:JD) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
JD.Com Inc (NASDAQ:JD) investors should be aware of a decrease in hedge fund interest of late. JD.Com Inc (NASDAQ:JD) was in 75 hedge funds’ portfolios at the end of March. The all time high for this statistic is 90. Our calculations also showed that JD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
According to most market participants, hedge funds are seen as slow, old investment vehicles of yesteryear. While there are more than 8000 funds trading today, Our researchers hone in on the masters of this group, approximately 850 funds. These investment experts oversee bulk of the hedge fund industry’s total asset base, and by keeping track of their best equity investments, Insider Monkey has spotted a few investment strategies that have historically defeated the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. 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 .
John Armitage of Egerton Capital
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Do Hedge Funds Think JD Is A Good Stock To Buy Now?
At first quarter’s end, a total of 75 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from one quarter earlier. On the other hand, there were a total of 90 hedge funds with a bullish position in JD a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Tiger Global Management LLC was the largest shareholder of JD.Com Inc (NASDAQ:JD), with a stake worth $4355.7 million reported as of the end of March. Trailing Tiger Global Management LLC was GQG Partners, which amassed a stake valued at $1648.6 million. D1 Capital Partners, Fisher Asset Management, and ARK Investment Management 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 Kontiki Capital allocated the biggest weight to JD.Com Inc (NASDAQ:JD), around 30.93% of its 13F portfolio. Kylin Management is also relatively very bullish on the stock, designating 17.84 percent of its 13F equity portfolio to JD.
Seeing as JD.Com Inc (NASDAQ:JD) has experienced a decline in interest from hedge fund managers, we can see that there were a few money managers that elected to cut their positions entirely heading into Q2. At the top of the heap, Philippe Laffont’s Coatue Management cut the largest position of all the hedgies tracked by Insider Monkey, totaling about $401.1 million in stock. Gabriel Plotkin’s fund, Melvin Capital Management, also sold off its stock, about $316.9 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 14 funds heading into Q2.
Let’s check out hedge fund activity in other stocks similar to JD.Com Inc (NASDAQ:JD). We will take a look at Royal Bank of Canada (NYSE:RY), Sony Corporation (NYSE:SNE), AstraZeneca plc (NYSE:AZN), Starbucks Corporation (NASDAQ:SBUX), Caterpillar Inc. (NYSE:CAT), Anheuser-Busch InBev SA/NV (NYSE:BUD), and Rio Tinto Group (NYSE:RIO). This group of stocks’ market caps match JD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RY | 18 | 716039 | 0 |
| SNE | 27 | 541868 | -1 |
| AZN | 34 | 2660857 | -7 |
| SBUX | 61 | 4442448 | -6 |
| CAT | 53 | 4956227 | 0 |
| BUD | 18 | 979916 | 0 |
| RIO | 25 | 1596509 | -1 |
| Average | 33.7 | 2270552 | -2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.7 hedge funds with bullish positions and the average amount invested in these stocks was $2271 million. That figure was $11310 million in JD’s case. Starbucks Corporation (NASDAQ:SBUX) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks JD.Com Inc (NASDAQ:JD) is more popular among hedge funds. Our overall hedge fund sentiment score for JD is 66. 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. 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 25.8% in 2021 through August 6th and still beat the market by 6.7 percentage points. Unfortunately JD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on JD were disappointed as the stock returned -17.5% since the end of the first quarter (through 8/6) 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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
