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Hedge Funds Are Crazy About Pinduoduo Inc. (PDD)

Abigail Fisher

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Pinduoduo Inc. (NASDAQ:PDD).

Pinduoduo Inc. (NASDAQ:PDD) investors should be aware of an increase in hedge fund sentiment in recent months. PDD was in 30 hedge funds' portfolios at the end of the third quarter of 2019. There were 29 hedge funds in our database with PDD positions at the end of the previous quarter. Our calculations also showed that PDD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

To most market participants, hedge funds are seen as unimportant, outdated financial tools of years past. While there are more than 8000 funds trading at the moment, Our experts hone in on the upper echelon of this club, approximately 750 funds. These hedge fund managers oversee the lion's share of all hedge funds' total asset base, and by paying attention to their first-class stock picks, Insider Monkey has discovered several investment strategies that have historically outstripped the broader indices. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_792409" align="aligncenter" width="464"] Brad Gerstner of Altimeter Capital[/caption]

Brad Gerstner Altimeter Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the fresh hedge fund action regarding Pinduoduo Inc. (NASDAQ:PDD).

How have hedgies been trading Pinduoduo Inc. (NASDAQ:PDD)?

Heading into the fourth quarter of 2019, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PDD over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

PDD_dec2019

When looking at the institutional investors followed by Insider Monkey, Hillhouse Capital Management, managed by Lei Zhang, holds the most valuable position in Pinduoduo Inc. (NASDAQ:PDD). Hillhouse Capital Management has a $359.1 million position in the stock, comprising 4.9% of its 13F portfolio. Sitting at the No. 2 spot is Brad Gerstner of Altimeter Capital Management, with a $280 million position; the fund has 6.8% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Renaissance Technologies, Karthik Sarma's SRS Investment Management and Daniel Patrick Gibson's Sylebra Capital Management. In terms of the portfolio weights assigned to each position EastBay Asset Management allocated the biggest weight to Pinduoduo Inc. (NASDAQ:PDD), around 8.53% of its portfolio. Altimeter Capital Management is also relatively very bullish on the stock, setting aside 6.83 percent of its 13F equity portfolio to PDD.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. North Peak Capital, managed by Michael Kahan and Jeremy Kahan, established the most outsized position in Pinduoduo Inc. (NASDAQ:PDD). North Peak Capital had $15.2 million invested in the company at the end of the quarter. Philippe Laffont's Coatue Management also initiated a $8.6 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management, John Overdeck and David Siegel's Two Sigma Advisors, and David E. Shaw's D E Shaw.

Let's now review hedge fund activity in other stocks similar to Pinduoduo Inc. (NASDAQ:PDD). These stocks are Delta Air Lines, Inc. (NYSE:DAL), Roper Technologies, Inc. (NYSE:ROP), China Telecom Corporation Limited (NYSE:CHA), and Welltower Inc. (NYSE:WELL). This group of stocks' market caps are similar to PDD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DAL,65,6996617,-5 ROP,37,1044629,2 CHA,8,24410,1 WELL,15,364970,-2 Average,31.25,2107657,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $2108 million. That figure was $1435 million in PDD's case. Delta Air Lines, Inc. (NYSE:DAL) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 8 bullish hedge fund positions. Pinduoduo Inc. (NASDAQ:PDD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on PDD as the stock returned 11.6% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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