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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Qudian Inc. (NYSE:QD) and determine whether the smart money was really smart about this stock.
Qudian Inc. (NYSE:QD) was in 10 hedge funds' portfolios at the end of March. QD investors should pay attention to a decrease in hedge fund sentiment recently. There were 14 hedge funds in our database with QD positions at the end of the previous quarter. Our calculations also showed that QD 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.
To the average investor there are tons of methods stock market investors put to use to assess stocks. A couple of the less known methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outperform the market by a solid margin (see the details here).
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Israel Englander of Millennium Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. 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 let's go over the new hedge fund action encompassing Qudian Inc. (NYSE:QD).
How have hedgies been trading Qudian Inc. (NYSE:QD)?
At Q1's end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the previous quarter. The graph below displays the number of hedge funds with bullish position in QD over the last 18 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in Qudian Inc. (NYSE:QD). Arrowstreet Capital has a $5.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Indus Capital, led by David Kowitz and Sheldon Kasowitz, holding a $2.5 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other peers with similar optimism consist of Israel Englander's Millennium Management, Renaissance Technologies and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Indus Capital allocated the biggest weight to Qudian Inc. (NYSE:QD), around 0.42% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to QD.
Judging by the fact that Qudian Inc. (NYSE:QD) has experienced falling interest from hedge fund managers, logic holds that there were a few money managers that elected to cut their positions entirely by the end of the first quarter. Intriguingly, Noam Gottesman's GLG Partners sold off the biggest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $23.1 million in stock. Andy Redleaf's fund, Whitebox Advisors, also dumped its stock, about $7.8 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Qudian Inc. (NYSE:QD) but similarly valued. We will take a look at Adecoagro SA (NYSE:AGRO), Diamond Eagle Acquisition Corp. (NASDAQ:DEACU), Accelerate Diagnostics Inc (NASDAQ:AXDX), and OMNOVA Solutions Inc. (NYSE:OMN). This group of stocks' market valuations are closest to QD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGRO,14,114033,2 DEACU,35,172599,12 AXDX,9,25259,2 OMN,20,89401,3 Average,19.5,100323,4.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $15 million in QD's case. Diamond Eagle Acquisition Corp. (NASDAQ:DEACU) is the most popular stock in this table. On the other hand Accelerate Diagnostics Inc (NASDAQ:AXDX) is the least popular one with only 9 bullish hedge fund positions. Qudian Inc. (NYSE:QD) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately QD wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); QD investors were disappointed as the stock returned -5.6% during the second quarter 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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.