We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Sea Limited (NYSE:SE) and determine whether the smart money was really smart about this stock.
Sea Limited (NYSE:SE) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged and stood at its all time high. The stock was in 76 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare SE to other stocks including IDEXX Laboratories, Inc. (NASDAQ:IDXX), Yum! Brands, Inc. (NYSE:YUM), and Johnson Controls International plc (NYSE:JCI) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are dozens of metrics stock traders can use to appraise their holdings. Two of the less utilized metrics are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outpace their index-focused peers by a very impressive margin (see the details here).
Philippe Laffont of Coatue Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the new hedge fund action surrounding Sea Limited (NYSE:SE).
What have hedge funds been doing with Sea Limited (NYSE:SE)?
At Q1’s end, a total of 76 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SE over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Sea Limited (NYSE:SE) was held by Tiger Global Management LLC, which reported holding $370.4 million worth of stock at the end of September. It was followed by Composite Capital with a $318 million position. Other investors bullish on the company included Kora Management, Coatue Management, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Kora Management allocated the biggest weight to Sea Limited (NYSE:SE), around 60.95% of its 13F portfolio. Composite Capital is also relatively very bullish on the stock, setting aside 60.17 percent of its 13F equity portfolio to SE.
Due to the fact that Sea Limited (NYSE:SE) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few money managers that slashed their positions entirely last quarter. Interestingly, Scott Ferguson’s Sachem Head Capital dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, valued at close to $83.9 million in stock. Adam Leitzes’s fund, Karst Peak Capital, also sold off its stock, about $56.3 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Sea Limited (NYSE:SE). We will take a look at IDEXX Laboratories, Inc. (NASDAQ:IDXX), Yum! Brands, Inc. (NYSE:YUM), Johnson Controls International plc (NYSE:JCI), and Kellogg Company (NYSE:K). This group of stocks’ market caps are similar to SE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IDXX | 31 | 517366 | -6 |
| YUM | 41 | 558913 | 5 |
| JCI | 37 | 1063858 | 0 |
| K | 37 | 610512 | 7 |
| Average | 36.5 | 687662 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $688 million. That figure was $3132 million in SE’s case. Yum! Brands, Inc. (NYSE:YUM) is the most popular stock in this table. On the other hand IDEXX Laboratories, Inc. (NASDAQ:IDXX) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks Sea Limited (NYSE:SE) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on SE as the stock returned 135.4% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
