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Here is What Hedge Funds Think About Xinyuan Real Estate Co., Ltd. (XIN)

·6 min read

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Xinyuan Real Estate Co., Ltd. (NYSE:XIN) changed recently.

Xinyuan Real Estate Co., Ltd. (NYSE:XIN) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that XIN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare XIN to other stocks including Evans Bancorp Inc. (NYSE:EVBN), Select Interior Concepts, Inc. (NASDAQ:SIC), and Gold Royalty Corp. (NYSE:GROY) to get a better sense of its popularity.

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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. 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. Now we're going to analyze the recent hedge fund action surrounding Xinyuan Real Estate Co., Ltd. (NYSE:XIN).

Do Hedge Funds Think XIN Is A Good Stock To Buy Now?

At first quarter's end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in XIN a year ago. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Is XIN A Good Stock To Buy?
Is XIN A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the biggest position in Xinyuan Real Estate Co., Ltd. (NYSE:XIN). Renaissance Technologies has a $0.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds a $0.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions comprise John Overdeck and David Siegel's Two Sigma Advisors, Israel Englander's Millennium Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position 0 allocated the biggest weight to Xinyuan Real Estate Co., Ltd. (NYSE:XIN), around 0.0005% of its 13F portfolio. 0 is also relatively very bullish on the stock, designating 0.0004 percent of its 13F equity portfolio to XIN.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Xinyuan Real Estate Co., Ltd. (NYSE:XIN) but similarly valued. These stocks are Evans Bancorp Inc. (NYSE:EVBN), Select Interior Concepts, Inc. (NASDAQ:SIC), Gold Royalty Corp. (NYSE:GROY), Gold Standard Ventures Corp (NYSE:GSV), RigNet Inc (NASDAQ:RNET), Velocity Financial, Inc. (NYSE:VEL), and scPharmaceuticals Inc. (NASDAQ:SCPH). This group of stocks' market caps are similar to XIN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EVBN,3,1082,-1 SIC,12,18500,-4 GROY,2,3186,2 GSV,4,23065,-4 RNET,11,34970,4 VEL,5,34132,-2 SCPH,8,68427,-1 Average,6.4,26195,-0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.4 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $1 million in XIN's case. Select Interior Concepts, Inc. (NASDAQ:SIC) is the most popular stock in this table. On the other hand Gold Royalty Corp. (NYSE:GROY) is the least popular one with only 2 bullish hedge fund positions. Xinyuan Real Estate Co., Ltd. (NYSE:XIN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for XIN is 30. 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. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on XIN as the stock returned 28.8% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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