Is LexinFintech Holdings Ltd. (NASDAQ:LX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
LexinFintech Holdings Ltd. (NASDAQ:LX) investors should be aware of an increase in activity from the world's largest hedge funds lately. Our calculations also showed that LX isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. We're going to take a glance at the key hedge fund action regarding LexinFintech Holdings Ltd. (NASDAQ:LX).
What does smart money think about LexinFintech Holdings Ltd. (NASDAQ:LX)?
Heading into the third quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the first quarter of 2019. On the other hand, there were a total of 4 hedge funds with a bullish position in LX a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in LexinFintech Holdings Ltd. (NASDAQ:LX), which was worth $17.4 million at the end of the second quarter. On the second spot was Kora Management which amassed $12.6 million worth of shares. Moreover, GLG Partners, Marshall Wace LLP, and Arrowstreet Capital were also bullish on LexinFintech Holdings Ltd. (NASDAQ:LX), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Kora Management, managed by Nitin Saigal and Dan Jacobs, initiated the largest position in LexinFintech Holdings Ltd. (NASDAQ:LX). Kora Management had $12.6 million invested in the company at the end of the quarter. Lee Ainslie's Maverick Capital also initiated a $3.3 million position during the quarter. The other funds with new positions in the stock are Benjamin A. Smith's Laurion Capital Management, John Overdeck and David Siegel's Two Sigma Advisors, and Michael Platt and William Reeves's BlueCrest Capital Mgmt..
Let's check out hedge fund activity in other stocks similar to LexinFintech Holdings Ltd. (NASDAQ:LX). We will take a look at Denali Therapeutics Inc. (NASDAQ:DNLI), BrightView Holdings, Inc. (NYSE:BV), Oceaneering International, Inc. (NYSE:OII), and Tellurian Inc. (NASDAQ:TELL). All of these stocks' market caps are closest to LX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DNLI,9,20646,-1 BV,8,304619,-1 OII,15,230924,-6 TELL,9,88902,-7 Average,10.25,161273,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $161 million. That figure was $78 million in LX's case. Oceaneering International, Inc. (NYSE:OII) is the most popular stock in this table. On the other hand BrightView Holdings, Inc. (NYSE:BV) is the least popular one with only 8 bullish hedge fund positions. LexinFintech Holdings Ltd. (NASDAQ:LX) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LX were disappointed as the stock returned -10.1% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.