Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of LexinFintech Holdings Ltd. (NASDAQ:LX) based on that data.
Is LX a good stock to buy now? LexinFintech Holdings Ltd. (NASDAQ:LX) was in 10 hedge funds' portfolios at the end of September. The all time high for this statistics is 17. LX investors should pay attention to a decrease in support from the world's most elite money managers in recent months. There were 14 hedge funds in our database with LX positions at the end of the second quarter. Our calculations also showed that LX isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 regarding LexinFintech Holdings Ltd. (NASDAQ:LX).
Do Hedge Funds Think LX Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LX over the last 21 quarters. 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, Millennium Management held the most valuable stake in LexinFintech Holdings Ltd. (NASDAQ:LX), which was worth $4.9 million at the end of the third quarter. On the second spot was Slate Path Capital which amassed $4.1 million worth of shares. Ovata Capital Management, Schonfeld Strategic Advisors, and Citadel Investment Group 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 Ovata Capital Management allocated the biggest weight to LexinFintech Holdings Ltd. (NASDAQ:LX), around 0.49% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, setting aside 0.23 percent of its 13F equity portfolio to LX.
Judging by the fact that LexinFintech Holdings Ltd. (NASDAQ:LX) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of hedgies who were dropping their full holdings by the end of the third quarter. It's worth mentioning that Glen Kacher's Light Street Capital said goodbye to the biggest investment of the 750 funds monitored by Insider Monkey, valued at an estimated $30.7 million in stock. Mark Kingdon's fund, Kingdon Capital, also sold off its stock, about $12.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as LexinFintech Holdings Ltd. (NASDAQ:LX) but similarly valued. We will take a look at Fluor Corporation (NYSE:FLR), Compass Diversified Holdings (NYSE:CODI), PDC Energy Inc (NASDAQ:PDCE), First Midwest Bancorp Inc (NASDAQ:FMBI), HeadHunter Group PLC (NASDAQ:HHR), Delek Logistics Partners LP (NYSE:DKL), and 360 DigiTech, Inc. (NASDAQ:QFIN). This group of stocks' market values are closest to LX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FLR,17,84394,-3 CODI,3,15974,-1 PDCE,24,211888,1 FMBI,17,43845,6 HHR,8,18061,3 DKL,1,2964,0 QFIN,15,49651,3 Average,12.1,60968,1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $12 million in LX's case. PDC Energy Inc (NASDAQ:PDCE) is the most popular stock in this table. On the other hand Delek Logistics Partners LP (NYSE:DKL) is the least popular one with only 1 bullish hedge fund positions. LexinFintech Holdings Ltd. (NASDAQ:LX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LX is 38.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately LX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LX investors were disappointed as the stock returned -2.2% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.