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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Vipshop Holdings Limited (NYSE:VIPS).
Vipshop Holdings Limited (NYSE:VIPS) has experienced an increase in activity from the world's largest hedge funds lately. Vipshop Holdings Limited (NYSE:VIPS) was in 54 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 27 hedge funds in our database with VIPS holdings at the end of December. Our calculations also showed that VIPS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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' 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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
David E. Shaw of D.E. Shaw
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Do Hedge Funds Think VIPS Is A Good Stock To Buy Now?
At the end of March, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the fourth quarter of 2020. By comparison, 30 hedge funds held shares or bullish call options in VIPS a year ago. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of Vipshop Holdings Limited (NYSE:VIPS), with a stake worth $215.9 million reported as of the end of March. Trailing D E Shaw was Millennium Management, which amassed a stake valued at $120.5 million. Point72 Asset Management, CaaS Capital, and Laurion Capital 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 Infini Capital allocated the biggest weight to Vipshop Holdings Limited (NYSE:VIPS), around 18.99% of its 13F portfolio. Voleon Capital is also relatively very bullish on the stock, setting aside 10.73 percent of its 13F equity portfolio to VIPS.
As industrywide interest jumped, specific money managers were leading the bulls' herd. D E Shaw, managed by D. E. Shaw, established the biggest position in Vipshop Holdings Limited (NYSE:VIPS). D E Shaw had $215.9 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also initiated a $72.8 million position during the quarter. The following funds were also among the new VIPS investors: Renaissance Technologies, Richard Gerson and Navroz D. Udwadia's Falcon Edge Capital, and George Soros's Soros Fund Management.
Let's go over hedge fund activity in other stocks similar to Vipshop Holdings Limited (NYSE:VIPS). These stocks are Fortis Inc. (NYSE:FTS), Cheniere Energy Partners LP (NYSE:CQP), Entergy Corporation (NYSE:ETR), Ventas, Inc. (NYSE:VTR), Restaurant Brands International Inc (NYSE:QSR), Regions Financial Corporation (NYSE:RF), and Burlington Stores Inc (NYSE:BURL). This group of stocks' market values are similar to VIPS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTS,10,179412,1 CQP,2,8851,-2 ETR,31,857729,-5 VTR,27,231183,9 QSR,26,2253516,-13 RF,32,272499,6 BURL,32,1440740,3 Average,22.9,749133,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $749 million. That figure was $1342 million in VIPS's case. Regions Financial Corporation (NYSE:RF) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Vipshop Holdings Limited (NYSE:VIPS) is more popular among hedge funds. Our overall hedge fund sentiment score for VIPS is 90. 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. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Unfortunately VIPS wasn't nearly as popular as these 5 stocks and hedge funds that were betting on VIPS were disappointed as the stock returned -25.7% since the end of the first quarter (through 6/11) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.