Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
JD.Com Inc (NASDAQ:JD) shareholders have witnessed an increase in hedge fund sentiment recently. JD was in 48 hedge funds' portfolios at the end of the first quarter of 2019. There were 34 hedge funds in our database with JD holdings at the end of the previous quarter. Our calculations also showed that jd isn't among the 30 most popular stocks among hedge funds.
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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's view the new hedge fund action encompassing JD.Com Inc (NASDAQ:JD).
What does the smart money think about JD.Com Inc (NASDAQ:JD)?
At the end of the first quarter, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 41% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JD over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in JD.Com Inc (NASDAQ:JD) was held by Tiger Global Management, which reported holding $1744.2 million worth of stock at the end of March. It was followed by D1 Capital Partners with a $425.5 million position. Other investors bullish on the company included Viking Global, First Pacific Advisors LLC, and Fisher Asset Management.
As one would reasonably expect, some big names were leading the bulls' herd. D1 Capital Partners, managed by Daniel Sundheim, created the most valuable position in JD.Com Inc (NASDAQ:JD). D1 Capital Partners had $425.5 million invested in the company at the end of the quarter. Andreas Halvorsen's Viking Global also made a $348.3 million investment in the stock during the quarter. The following funds were also among the new JD investors: Josh Resnick's Jericho Capital Asset Management, Zach Schreiber's Point State Capital, and David Fiszel's Honeycomb Asset Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as JD.Com Inc (NASDAQ:JD) but similarly valued. These stocks are Telefonica S.A. (NYSE:TEF), Phillips 66 (NYSE:PSX), Intercontinental Exchange Inc (NYSE:ICE), and Orange S.A. (NYSE:ORAN). All of these stocks' market caps match JD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TEF,10,39168,4 PSX,43,1601311,-4 ICE,35,1777571,-6 ORAN,2,1103,0 Average,22.5,854788,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $855 million. That figure was $4342 million in JD's case. Phillips 66 (NYSE:PSX) is the most popular stock in this table. On the other hand Orange S.A. (NYSE:ORAN) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks JD.Com Inc (NASDAQ:JD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately JD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on JD were disappointed as the stock returned -12.6% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.