We can judge whether Bitauto Hldg Ltd (NYSE:BITA) 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.
Hedge fund interest in Bitauto Hldg Ltd (NYSE:BITA) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Lithia Motors Inc (NYSE:LAD), Herman Miller, Inc. (NASDAQ:MLHR), and Power Integrations Inc (NASDAQ:POWI) to gather more data points.
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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to view the key hedge fund action regarding Bitauto Hldg Ltd (NYSE:BITA).
How have hedgies been trading Bitauto Hldg Ltd (NYSE:BITA)?
Heading into the first quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in BITA a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Platinum Asset Management was the largest shareholder of Bitauto Hldg Ltd (NYSE:BITA), with a stake worth $15.2 million reported as of the end of December. Trailing Platinum Asset Management was Citadel Investment Group, which amassed a stake valued at $1.5 million. Weld Capital Management, AQR Capital Management, and OZ Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Bitauto Hldg Ltd (NYSE:BITA) has experienced declining sentiment from the smart money, it's easy to see that there is a sect of hedgies who sold off their positions entirely heading into Q3. Intriguingly, Sander Gerber's Hudson Bay Capital Management cut the biggest investment of the "upper crust" of funds monitored by Insider Monkey, valued at close to $2.1 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund dropped about $1.9 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Bitauto Hldg Ltd (NYSE:BITA). These stocks are Lithia Motors Inc (NYSE:LAD), Herman Miller, Inc. (NASDAQ:MLHR), Power Integrations Inc (NASDAQ:POWI), and GreenSky, Inc. (NASDAQ:GSKY). This group of stocks' market values resemble BITA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LAD,20,470442,1 MLHR,22,99011,2 POWI,4,81545,-5 GSKY,20,33315,0 Average,16.5,171078,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $18 million in BITA's case. Herman Miller, Inc. (NASDAQ:MLHR) is the most popular stock in this table. On the other hand Power Integrations Inc (NASDAQ:POWI) is the least popular one with only 4 bullish hedge fund positions. Bitauto Hldg Ltd (NYSE:BITA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately BITA wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); BITA investors were disappointed as the stock returned -40.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.