We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Jumia Technologies AG (NYSE:JMIA).
Jumia Technologies AG (NYSE:JMIA) was in 6 hedge funds' portfolios at the end of the third quarter of 2019. JMIA has seen a decrease in enthusiasm from smart money of late. There were 8 hedge funds in our database with JMIA positions at the end of the previous quarter. Our calculations also showed that JMIA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are assumed to be worthless, outdated financial vehicles of years past. While there are greater than 8000 funds in operation at present, We choose to focus on the elite of this group, around 750 funds. Most estimates calculate that this group of people orchestrate the lion's share of the smart money's total capital, and by watching their best picks, Insider Monkey has come up with a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_26340" align="aligncenter" width="467"] Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to check out the recent hedge fund action surrounding Jumia Technologies AG (NYSE:JMIA).
What does smart money think about Jumia Technologies AG (NYSE:JMIA)?
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards JMIA over the last 17 quarters. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in Jumia Technologies AG (NYSE:JMIA) was held by Citadel Investment Group, which reported holding $1.1 million worth of stock at the end of September. It was followed by Sculptor Capital with a $1 million position. Other investors bullish on the company included Weld Capital Management, Tenzing Global Investors, and ExodusPoint Capital. In terms of the portfolio weights assigned to each position Tenzing Global Investors allocated the biggest weight to Jumia Technologies AG (NYSE:JMIA), around 0.16% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.12 percent of its 13F equity portfolio to JMIA.
Judging by the fact that Jumia Technologies AG (NYSE:JMIA) has faced declining sentiment from hedge fund managers, it's safe to say that there were a few hedgies that elected to cut their full holdings heading into Q4. Intriguingly, Ken Griffin's Citadel Investment Group cut the biggest stake of the "upper crust" of funds monitored by Insider Monkey, valued at about $1.1 million in stock, and David E. Shaw's D E Shaw was right behind this move, as the fund cut about $0.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Jumia Technologies AG (NYSE:JMIA) but similarly valued. These stocks are Front Yard Residential Corporation (NYSE:RESI), Organogenesis Holdings Inc. (NASDAQ:ORGO), DBV Technologies SA (NASDAQ:DBVT), and Anterix Inc. (NASDAQ:ATEX). All of these stocks' market caps match JMIA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RESI,15,34064,4 ORGO,2,1103,0 DBVT,7,112668,-3 ATEX,11,317816,2 Average,8.75,116413,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $2 million in JMIA's case. Front Yard Residential Corporation (NYSE:RESI) is the most popular stock in this table. On the other hand Organogenesis Holdings Inc. (NASDAQ:ORGO) is the least popular one with only 2 bullish hedge fund positions. Jumia Technologies AG (NYSE:JMIA) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately JMIA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); JMIA investors were disappointed as the stock returned -21.1% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.