Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Baidu.com, Inc. (ADR) (NASDAQ:BIDU) was in 52 hedge funds’ portfolios at the end of the third quarter of 2015. BIDU shareholders have witnessed a decrease in hedge fund sentiment lately. There were 70 hedge funds in our database with BIDU holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Regeneron Pharmaceuticals Inc (NASDAQ:REGN), The TJX Companies, Inc. (NYSE:TJX), and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) to gather more data points.
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Keeping this in mind, we’re going to review the latest action surrounding Baidu.com, Inc. (ADR) (NASDAQ:BIDU).
How have hedgies been trading Baidu.com, Inc. (ADR) (NASDAQ:BIDU)?
At the end of the third quarter, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Scopia Capital, managed by Matt Sirovich and Jeremy Mindich, holds the largest position in Baidu.com, Inc. (ADR) (NASDAQ:BIDU). Scopia Capital has a $377.2 million position in the stock, comprising 8.1% of its 13F portfolio. On Scopia Capital’s heels is Cantillon Capital Management, led by William von Mueffling, holding a $304.7 million position; 6.5% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish comprise William B. Gray’s Orbis Investment Management, Ricky Sandler’s Eminence Capital and Kerr Neilson’s Platinum Asset Management.
Because Baidu.com, Inc. (ADR) (NASDAQ:BIDU) has experienced a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds who were dropping their full holdings heading into Q4. Interestingly, Andreas Halvorsen’s Viking Global cut the largest stake of the 700 funds watched by Insider Monkey, worth close to $255.9 million in stock, and John Lykouretzos’ Hoplite Capital Management was right behind this move, as the fund sold off about $172 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 18 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Baidu.com, Inc. (ADR) (NASDAQ:BIDU) but similarly valued. These stocks are Regeneron Pharmaceuticals Inc (NASDAQ:REGN), The TJX Companies, Inc. (NYSE:TJX), Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), and General Motors Company (NYSE:GM). This group of stocks’ market valuations resemble BIDU’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REGN | 32 | 1053183 | 3 |
| TJX | 37 | 1501811 | 4 |
| TEVA | 70 | 6803084 | -7 |
| GM | 88 | 5112756 | -16 |
As you can see these stocks had an average of 56.75 hedge funds with bullish positions and the average amount invested in these stocks was $3618 million. That figure was $3401 million in BIDU’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is the least popular one with only 32 bullish hedge fund positions. Baidu.com, Inc. (ADR) (NASDAQ:BIDU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GM might be a better candidate to consider a long position.
