Is IQ Stock A Buy or Sell?
Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about iQIYI, Inc. (NASDAQ:IQ) in this article.
Is IQ stock a buy? iQIYI, Inc. (NASDAQ:IQ) was in 30 hedge funds' portfolios at the end of December. The all time high for this statistic is 40. IQ investors should pay attention to an increase in hedge fund interest in recent months. There were 18 hedge funds in our database with IQ holdings at the end of September. Our calculations also showed that IQ isn't among the 30 most popular stocks among hedge funds (click for Q4 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 124 percentage points since March 2017 (see the details here).
Lei Zhang of Hillhouse Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Now let's take a look at the recent hedge fund action encompassing iQIYI, Inc. (NASDAQ:IQ).
Do Hedge Funds Think IQ Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the third quarter of 2020. By comparison, 18 hedge funds held shares or bullish call options in IQ a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Hillhouse Capital Management held the most valuable stake in iQIYI, Inc. (NASDAQ:IQ), which was worth $675.6 million at the end of the fourth quarter. On the second spot was LMR Partners which amassed $71 million worth of shares. CaaS Capital, Segantii Capital, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Long Corridor Asset Management allocated the biggest weight to iQIYI, Inc. (NASDAQ:IQ), around 14.69% of its 13F portfolio. Hillhouse Capital Management is also relatively very bullish on the stock, earmarking 5.37 percent of its 13F equity portfolio to IQ.
Now, some big names were breaking ground themselves. CaaS Capital, managed by Frank Fu, initiated the biggest position in iQIYI, Inc. (NASDAQ:IQ). CaaS Capital had $33.5 million invested in the company at the end of the quarter. Simon Sadler's Segantii Capital also made a $30.2 million investment in the stock during the quarter. The following funds were also among the new IQ investors: Israel Englander's Millennium Management, Michael Kharitonov and Jon David McAuliffe's Voleon Capital, and James Xinjun Tu's Long Corridor Asset Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as iQIYI, Inc. (NASDAQ:IQ) but similarly valued. These stocks are VICI Properties Inc. (NYSE:VICI), Principal Financial Group Inc (NYSE:PFG), Eastman Chemical Company (NYSE:EMN), Discovery Inc. (NASDAQ:DISCA), Crown Holdings, Inc. (NYSE:CCK), Brookfield Property Partners LP (NYSE:BPY), and Brown & Brown, Inc. (NYSE:BRO). This group of stocks' market values match IQ's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VICI,38,970234,-2 PFG,26,117451,1 EMN,31,133838,4 DISCA,28,226741,-1 CCK,63,2030129,16 BPY,9,26137,1 BRO,29,931431,0 Average,32,633709,2.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $634 million. That figure was $1049 million in IQ's case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Brookfield Property Partners LP (NYSE:BPY) is the least popular one with only 9 bullish hedge fund positions. iQIYI, Inc. (NASDAQ:IQ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IQ is 51.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and surpassed the market again by 1.5 percentage points. Unfortunately IQ wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); IQ investors were disappointed as the stock returned -7.6% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.
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