At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards SINA Corp (NASDAQ:SINA) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is SINA Corp (NASDAQ:SINA) a healthy stock for your portfolio? Hedge funds were taking a bearish view. The number of bullish hedge fund bets fell by 5 lately. Our calculations also showed that SINA 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_746830" align="aligncenter" width="400"] Matthew Hulsizer of PEAK6 Capital[/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 8 states that allow euthanasia to identify emerging trends that are likely to lead to 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. With all of this in mind we're going to check out the key hedge fund action regarding SINA Corp (NASDAQ:SINA).
Hedge fund activity in SINA Corp (NASDAQ:SINA)
At Q1's end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in SINA a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, International Value Advisers held the most valuable stake in SINA Corp (NASDAQ:SINA), which was worth $51.7 million at the end of the third quarter. On the second spot was HBK Investments which amassed $30.7 million worth of shares. D E Shaw, Renaissance Technologies, and Citadel Investment Group 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 International Value Advisers allocated the biggest weight to SINA Corp (NASDAQ:SINA), around 3.27% of its 13F portfolio. HBK Investments is also relatively very bullish on the stock, setting aside 0.94 percent of its 13F equity portfolio to SINA.
Because SINA Corp (NASDAQ:SINA) has witnessed bearish sentiment from the aggregate hedge fund industry, it's easy to see that there was a specific group of funds that elected to cut their full holdings by the end of the first quarter. At the top of the heap, Frank Slattery's Symmetry Peak Management sold off the biggest position of the "upper crust" of funds monitored by Insider Monkey, worth about $1.7 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund cut about $0.6 million worth. These transactions are interesting, as total hedge fund interest was cut by 5 funds by the end of the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as SINA Corp (NASDAQ:SINA) but similarly valued. We will take a look at Mimecast Limited (NASDAQ:MIME), Stamps.com Inc. (NASDAQ:STMP), American National Insurance Company (NASDAQ:ANAT), and Laureate Education, Inc. (NASDAQ:LAUR). All of these stocks' market caps are closest to SINA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MIME,39,517022,8 STMP,29,465670,9 ANAT,14,48453,-2 LAUR,25,197669,-9 Average,26.75,307204,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $307 million. That figure was $125 million in SINA's case. Mimecast Limited (NASDAQ:MIME) is the most popular stock in this table. On the other hand American National Insurance Company (NASDAQ:ANAT) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks SINA Corp (NASDAQ:SINA) is even less popular than ANAT. Hedge funds dodged a bullet by taking a bearish stance towards SINA. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market by 16.8 percentage points. Unfortunately SINA wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SINA investors were disappointed as the stock returned 11.7% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.