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The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards HDFC Bank Limited (NYSE:HDB).
HDFC Bank Limited (NYSE:HDB) was in 27 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 42. HDB investors should be aware of a decrease in hedge fund sentiment of late. There were 31 hedge funds in our database with HDB positions at the end of the fourth quarter. Our calculations also showed that HDB isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to analyze the fresh hedge fund action surrounding HDFC Bank Limited (NYSE:HDB).
Do Hedge Funds Think HDB Is A Good Stock To Buy Now?
At Q1's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the fourth quarter of 2020. On the other hand, there were a total of 38 hedge funds with a bullish position in HDB 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.
The largest stake in HDFC Bank Limited (NYSE:HDB) was held by GQG Partners, which reported holding $485.5 million worth of stock at the end of December. It was followed by Fisher Asset Management with a $426.9 million position. Other investors bullish on the company included Two Creeks Capital Management, Impax Asset Management, and Steadfast Capital Management. In terms of the portfolio weights assigned to each position Two Creeks Capital Management allocated the biggest weight to HDFC Bank Limited (NYSE:HDB), around 14.29% of its 13F portfolio. Aubrey Capital Management is also relatively very bullish on the stock, designating 6.18 percent of its 13F equity portfolio to HDB.
Because HDFC Bank Limited (NYSE:HDB) has witnessed declining 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 entire stakes heading into Q2. Interestingly, Josh Donfeld and David Rogers's Castle Hook Partners said goodbye to the biggest position of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $22.2 million in stock. John Horseman's fund, Horseman Capital Management, also dumped its stock, about $7.3 million worth. These moves are important to note, as total hedge fund interest dropped by 4 funds heading into Q2.
Let's now take a look at hedge fund activity in other stocks similar to HDFC Bank Limited (NYSE:HDB). These stocks are Bristol Myers Squibb Company (NYSE:BMY), Philip Morris International Inc. (NYSE:PM), Shopify Inc (NYSE:SHOP), Lowe's Companies, Inc. (NYSE:LOW), Charter Communications, Inc. (NASDAQ:CHTR), JD.Com Inc (NASDAQ:JD), and Royal Bank of Canada (NYSE:RY). This group of stocks' market values match HDB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BMY,81,5037397,-50 PM,48,5494085,-4 SHOP,91,9984457,1 LOW,61,5171876,-10 CHTR,74,16399220,-16 JD,75,11309916,-14 RY,18,716039,0 Average,64,7730427,-13.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 64 hedge funds with bullish positions and the average amount invested in these stocks was $7730 million. That figure was $1965 million in HDB's case. Shopify Inc (NYSE:SHOP) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 18 bullish hedge fund positions. HDFC Bank Limited (NYSE:HDB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HDB is 26.5. 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. 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 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 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately HDB wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); HDB investors were disappointed as the stock returned -5% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.