Is Jumia Technologies AG (NYSE:JMIA) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Jumia Technologies AG (NYSE:JMIA) a good investment right now? Prominent investors are turning bullish. The number of bullish hedge fund positions increased by 8 recently. Our calculations also showed that JMIA isn't among the 30 most popular stocks among hedge funds (see the video below). JMIA was in 8 hedge funds' portfolios at the end of June. There were 0 hedge funds in our database with JMIA holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the new hedge fund action regarding Jumia Technologies AG (NYSE:JMIA).
What does smart money think about Jumia Technologies AG (NYSE:JMIA)?
At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8 from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JMIA over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Michael Gelband's ExodusPoint Capital has the most valuable position in Jumia Technologies AG (NYSE:JMIA), worth close to $2.6 million, amounting to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $2.4 million call position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish contain Israel Englander's Millennium Management, OZ Management and Ken Griffin's Citadel Investment Group.
Consequently, some big names were leading the bulls' herd. ExodusPoint Capital, managed by Michael Gelband, assembled the most outsized position in Jumia Technologies AG (NYSE:JMIA). ExodusPoint Capital had $2.6 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $2.4 million investment in the stock during the quarter. The following funds were also among the new JMIA investors: Israel Englander's Millennium Management, OZ Management, and Ken Griffin's Citadel Investment Group.
Let's also examine hedge fund activity in other stocks similar to Jumia Technologies AG (NYSE:JMIA). These stocks are Capitol Federal Financial, Inc. (NASDAQ:CFFN), Natera Inc (NASDAQ:NTRA), Banner Corporation (NASDAQ:BANR), and Advanced Drainage Systems, Inc. (NYSE:WMS). This group of stocks' market valuations are similar to JMIA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CFFN,11,151317,0 NTRA,20,242886,2 BANR,16,87634,-2 WMS,17,325568,0 Average,16,201851,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $9 million in JMIA's case. Natera Inc (NASDAQ:NTRA) is the most popular stock in this table. On the other hand Capitol Federal Financial, Inc. (NASDAQ:CFFN) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Jumia Technologies AG (NYSE:JMIA) is even less popular than CFFN. Hedge funds dodged a bullet by taking a bearish stance towards JMIA. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately JMIA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); JMIA investors were disappointed as the stock returned -70% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.