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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Secoo Holding Limited (NASDAQ:SECO).
Is Secoo Holding Limited (NASDAQ:SECO) a buy, sell, or hold? The smart money was getting more bullish. The number of long hedge fund bets rose by 2 in recent months. Secoo Holding Limited (NASDAQ:SECO) was in 6 hedge funds' portfolios at the end of March. The all time high for this statistic is 8. Our calculations also showed that SECO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's review the fresh hedge fund action regarding Secoo Holding Limited (NASDAQ:SECO).
Do Hedge Funds Think SECO Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in SECO a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GLG Partners held the most valuable stake in Secoo Holding Limited (NASDAQ:SECO), which was worth $2.7 million at the end of the fourth quarter. On the second spot was Indus Capital which amassed $1.8 million worth of shares. Renaissance Technologies, Symmetry Peak Management, and Millennium 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 Symmetry Peak Management allocated the biggest weight to Secoo Holding Limited (NASDAQ:SECO), around 2.15% of its 13F portfolio. Indus Capital is also relatively very bullish on the stock, dishing out 0.31 percent of its 13F equity portfolio to SECO.
Consequently, key money managers were breaking ground themselves. GLG Partners, managed by Noam Gottesman, assembled the largest position in Secoo Holding Limited (NASDAQ:SECO). GLG Partners had $2.7 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer's PEAK6 Capital Management.
Let's go over hedge fund activity in other stocks similar to Secoo Holding Limited (NASDAQ:SECO). These stocks are Axcella Health Inc. (NASDAQ:AXLA), Eton Pharmaceuticals, Inc. (NASDAQ:ETON), Polar Power, Inc. (NASDAQ:POLA), Esquire Financial Holdings, Inc. (NASDAQ:ESQ), Tsakos Energy Navigation Ltd. (NYSE:TNP), SPI Energy Co., Ltd. (NASDAQ:SPI), and Overseas Shipholding Group, Inc. (NYSE:OSG). This group of stocks' market values resemble SECO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AXLA,2,394,-1 ETON,6,31704,1 POLA,2,3105,-1 ESQ,2,17992,-1 TNP,5,15402,-1 SPI,5,2057,1 OSG,10,49316,-2 Average,4.6,17139,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.6 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $6 million in SECO's case. Overseas Shipholding Group, Inc. (NYSE:OSG) is the most popular stock in this table. On the other hand Axcella Health Inc. (NASDAQ:AXLA) is the least popular one with only 2 bullish hedge fund positions. Secoo Holding Limited (NASDAQ:SECO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SECO is 54.5. 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 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately SECO wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SECO were disappointed as the stock returned 0% since the end of March (through 6/25) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.