In this article we will check out the progression of hedge fund sentiment towards XPeng Inc. (NYSE:XPEV) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in XPeng Inc. (NYSE:XPEV) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that XPEV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare XPEV to other stocks including Cummins Inc. (NYSE:CMI), Xilinx, Inc. (NASDAQ:XLNX), and TransDigm Group Incorporated (NYSE:TDG) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Philippe Laffont of Coatue Management
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Do Hedge Funds Think XPEV Is A Good Stock To Buy Now?
At Q2’s end, a total of 19 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 XPEV over the last 24 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, 0 was the largest shareholder of XPeng Inc. (NYSE:XPEV), with a stake worth $461.1 million reported as of the end of June. Trailing Coatue Management was Citadel Investment Group, which amassed a stake valued at $81.8 million. Light Street Capital, Marshall Wace LLP, and Hillhouse Capital 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 Light Street Capital allocated the biggest weight to XPeng Inc. (NYSE:XPEV), around 2.64% of its 13F portfolio. Coatue Management is also relatively very bullish on the stock, dishing out 1.81 percent of its 13F equity portfolio to XPEV.
Due to the fact that XPeng Inc. (NYSE:XPEV) has witnessed bearish sentiment from hedge fund managers, logic holds that there were a few funds that elected to cut their entire stakes by the end of the second quarter. At the top of the heap, Andreas Halvorsen’s Viking Global said goodbye to the biggest position of all the hedgies followed by Insider Monkey, comprising an estimated $152.1 million in stock, and Simon Sadler’s Segantii Capital was right behind this move, as the fund cut about $62.4 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as XPeng Inc. (NYSE:XPEV) but similarly valued. We will take a look at Cummins Inc. (NYSE:CMI), Xilinx, Inc. (NASDAQ:XLNX), TransDigm Group Incorporated (NYSE:TDG), Xcel Energy Inc (NYSE:XEL), Brown-Forman Corporation (NYSE:BF), Alcon Inc. (NYSE:ALC), and Republic Services, Inc. (NYSE:RSG). This group of stocks’ market valuations are similar to XPEV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMI | 45 | 1102223 | 8 |
| XLNX | 59 | 4162249 | 2 |
| TDG | 57 | 7351832 | -5 |
| XEL | 22 | 235410 | 4 |
| BF | 31 | 1667783 | -4 |
| ALC | 22 | 727825 | -1 |
| RSG | 34 | 1289299 | -2 |
| Average | 38.6 | 2362374 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $2362 million. That figure was $785 million in XPEV’s case. Xilinx, Inc. (NASDAQ:XLNX) is the most popular stock in this table. On the other hand Xcel Energy Inc (NYSE:XEL) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks XPeng Inc. (NYSE:XPEV) is even less popular than XEL. Our overall hedge fund sentiment score for XPEV is 24. 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. Hedge funds dodged a bullet by taking a bearish stance towards XPEV. Our calculations showed that the top 5 most popular hedge fund stocks 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 through November 5th but managed to beat the market again by 3.1 percentage points. Unfortunately XPEV wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); XPEV investors were disappointed as the stock returned 4.4% since the end of the second quarter (through 11/5) 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.
Follow Xpeng Inc. (NYSE:XPEV)
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Disclosure: None. This article was originally published at Insider Monkey.
