Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards NIO Inc. (NYSE:NIO) at the end of the third quarter and determine whether the smart money was really smart about this stock.
NIO Inc. (NYSE:NIO) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 35. NIO investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. There were 34 hedge funds in our database with NIO positions at the end of the second quarter. Our calculations also showed that NIO 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 view the latest hedge fund action encompassing NIO Inc. (NYSE:NIO).
Tim Woolley of Polar Capital
Do Hedge Funds Think NIO Is A Good Stock To Buy Now?
At third quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NIO over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in NIO Inc. (NYSE:NIO) was held by D E Shaw, which reported holding $246.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $201.5 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Segantii Capital. In terms of the portfolio weights assigned to each position Long Corridor Asset Management allocated the biggest weight to NIO Inc. (NYSE:NIO), around 17.73% of its 13F portfolio. Segantii Capital is also relatively very bullish on the stock, designating 4.12 percent of its 13F equity portfolio to NIO.
Judging by the fact that NIO Inc. (NYSE:NIO) has witnessed bearish sentiment from hedge fund managers, we can see that there were a few money managers who were dropping their positions entirely in the third quarter. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors cut the biggest investment of all the hedgies monitored by Insider Monkey, valued at close to $213 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also dropped its stock, about $93.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 4 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to NIO Inc. (NYSE:NIO). These stocks are FedEx Corporation (NYSE:FDX), América Móvil, S.A.B. de C.V. (NYSE:AMOV), Northrop Grumman Corporation (NYSE:NOC), NetEase, Inc (NASDAQ:NTES), Air Products & Chemicals, Inc. (NYSE:APD), Ford Motor Company (NYSE:F), and ING Groep N.V. (NYSE:ING). All of these stocks’ market caps are similar to NIO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FDX | 49 | 1682204 | -12 |
| AMOV | 1 | 300 | 0 |
| NOC | 29 | 910523 | -13 |
| NTES | 32 | 2326768 | -11 |
| APD | 32 | 528730 | -8 |
| F | 51 | 1642491 | -4 |
| ING | 8 | 693351 | -1 |
| Average | 28.9 | 1112052 | -7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $1112 million. That figure was $1138 million in NIO’s case. Ford Motor Company (NYSE:F) is the most popular stock in this table. On the other hand América Móvil, S.A.B. de C.V. (NYSE:AMOV) is the least popular one with only 1 bullish hedge fund positions. NIO Inc. (NYSE:NIO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NIO is 55.7. 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, NIO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NIO were disappointed as the stock returned -31.2% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
