Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year through May 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' stock picks rather than directly investing in hedge funds. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like 51job, Inc. (NASDAQ:JOBS).
51job, Inc. (NASDAQ:JOBS) has seen a decrease in hedge fund interest of late. JOBS was in 12 hedge funds' portfolios at the end of the first quarter of 2019. There were 13 hedge funds in our database with JOBS positions at the end of the previous quarter. Our calculations also showed that JOBS isn't among the 30 most popular stocks among hedge funds.
In the 21st century investor’s toolkit there are many metrics stock traders can use to value their stock investments. A pair of the most under-the-radar metrics are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the broader indices by a healthy margin (see the details here).
We're going to take a look at the new hedge fund action regarding 51job, Inc. (NASDAQ:JOBS).
How have hedgies been trading 51job, Inc. (NASDAQ:JOBS)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in JOBS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Sloane Robinson Investment Management was the largest shareholder of 51job, Inc. (NASDAQ:JOBS), with a stake worth $10.4 million reported as of the end of March. Trailing Sloane Robinson Investment Management was Sensato Capital Management, which amassed a stake valued at $9.9 million. Fisher Asset Management, Weld Capital Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Because 51job, Inc. (NASDAQ:JOBS) has faced a decline in interest from hedge fund managers, it's easy to see that there is a sect of hedgies who were dropping their full holdings heading into Q3. It's worth mentioning that David Kowitz and Sheldon Kasowitz's Indus Capital said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $1.6 million in stock. David Costen Haley's fund, HBK Investments, also sold off its stock, about $0.6 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to 51job, Inc. (NASDAQ:JOBS). We will take a look at Empire State Realty Trust Inc (NYSE:ESRT), nVent Electric plc (NYSE:NVT), Acuity Brands, Inc. (NYSE:AYI), and The Stars Group Inc. (NASDAQ:TSG). This group of stocks' market caps match JOBS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESRT,14,161856,1 NVT,25,920355,-3 AYI,29,795548,2 TSG,44,902595,4 Average,28,695089,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $695 million. That figure was $29 million in JOBS's case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand Empire State Realty Trust Inc (NYSE:ESRT) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks 51job, Inc. (NASDAQ:JOBS) is even less popular than ESRT. Hedge funds dodged a bullet by taking a bearish stance towards JOBS. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately JOBS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); JOBS investors were disappointed as the stock returned -4.9% during the same time frame and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.