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Hedge Funds Cautiously Watching NIO Inc. (NIO)

Debasis Saha

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. In this article, we look at what those funds think of NIO Inc. (NYSE:NIO) based on that data.

NIO Inc. (NYSE:NIO) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds' portfolios at the end of the first quarter of 2020. 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 frontdoor, inc. (NASDAQ:FTDR), Polaris Inc. (NYSE:PII), and Selective Insurance Group (NASDAQ:SIGI) to gather more data points. Our calculations also showed that NIO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are tons of tools shareholders use to appraise their stock investments. A couple of the most innovative tools are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outpace the S&P 500 by a significant margin (see the details here).

[caption id="attachment_256969" align="aligncenter" width="400"] Christian Leone of Luxor Capital Group[/caption]

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 PayPal alternatives for international payments to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we're going to take a peek at the recent hedge fund action regarding NIO Inc. (NYSE:NIO).

What have hedge funds been doing with NIO Inc. (NYSE:NIO)?

Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NIO over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is NIO A Good Stock To Buy?

The largest stake in NIO Inc. (NYSE:NIO) was held by Citadel Investment Group, which reported holding $8.3 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $6.8 million position. Other investors bullish on the company included Millennium Management, HBK Investments, and Laurion Capital Management. In terms of the portfolio weights assigned to each position Oasis Management allocated the biggest weight to NIO Inc. (NYSE:NIO), around 3.22% of its 13F portfolio. Aequim Alternative Investments is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to NIO.

Judging by the fact that NIO Inc. (NYSE:NIO) has faced declining sentiment from the smart money, it's easy to see that there was a specific group of money managers that elected to cut their full holdings last quarter. Intriguingly, Jonathan Auerbach's Hound Partners dropped the largest investment of all the hedgies tracked by Insider Monkey, totaling close to $7.8 million in stock. Bruce Kovner's fund, Caxton Associates LP, also said goodbye to its stock, about $3.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out hedge fund activity in other stocks similar to NIO Inc. (NYSE:NIO). We will take a look at frontdoor, inc. (NASDAQ:FTDR), Polaris Inc. (NYSE:PII), Selective Insurance Group (NASDAQ:SIGI), and BlackLine, Inc. (NASDAQ:BL). All of these stocks' market caps are closest to NIO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTDR,33,552969,-4 PII,24,157435,-2 SIGI,15,70570,-10 BL,18,175505,1 Average,22.5,239120,-3.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $239 million. That figure was $29 million in NIO's case. frontdoor, inc. (NASDAQ:FTDR) is the most popular stock in this table. On the other hand Selective Insurance Group (NASDAQ:SIGI) is the least popular one with only 15 bullish hedge fund positions. NIO Inc. (NYSE:NIO) is not the least popular stock in this group but hedge fund interest is still below average. 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 gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on NIO as the stock returned 154.7% during the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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