We can judge whether JinkoSolar Holding Co., Ltd. (NYSE:JKS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
JinkoSolar Holding Co., Ltd. (NYSE:JKS) was in 6 hedge funds' portfolios at the end of September. JKS investors should pay attention to a decrease in support from the world's most elite money managers lately. There were 8 hedge funds in our database with JKS positions at the end of the previous quarter. Our calculations also showed that JKS 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.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to take a look at the fresh hedge fund action encompassing JinkoSolar Holding Co., Ltd. (NYSE:JKS).
What have hedge funds been doing with JinkoSolar Holding Co., Ltd. (NYSE:JKS)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 2 hedge funds with a bullish position in JKS a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in JinkoSolar Holding Co., Ltd. (NYSE:JKS) was held by D E Shaw, which reported holding $9.4 million worth of stock at the end of September. It was followed by Sensato Capital Management with a $1.7 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Sensato Capital Management allocated the biggest weight to JinkoSolar Holding Co., Ltd. (NYSE:JKS), around 0.66% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to JKS.
Due to the fact that JinkoSolar Holding Co., Ltd. (NYSE:JKS) has witnessed a decline in interest from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedge funds that slashed their positions entirely in the third quarter. It's worth mentioning that Renaissance Technologies said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, comprising an estimated $4.1 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also cut its stock, about $0.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let's also examine hedge fund activity in other stocks similar to JinkoSolar Holding Co., Ltd. (NYSE:JKS). We will take a look at NextCure, Inc. (NASDAQ:NXTC), Astec Industries, Inc. (NASDAQ:ASTE), Emerald Expositions Events, Inc. (NYSE:EEX), and United Financial Bancorp, Inc. (NASDAQ:UBNK). All of these stocks' market caps resemble JKS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXTC,8,189131,0 ASTE,13,83531,2 EEX,14,12181,7 UBNK,14,86797,5 Average,12.25,92910,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $14 million in JKS's case. Emerald Expositions Events, Inc. (NYSE:EEX) is the most popular stock in this table. On the other hand NextCure, Inc. (NASDAQ:NXTC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks JinkoSolar Holding Co., Ltd. (NYSE:JKS) is even less popular than NXTC. Hedge funds clearly dropped the ball on JKS as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 JKS as the stock returned 15% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.