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 have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Pinduoduo Inc. (NASDAQ:PDD) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Is PDD a good stock to buy? Pinduoduo Inc. (NASDAQ:PDD) has seen an increase in activity from the world's largest hedge funds in recent months. Pinduoduo Inc. (NASDAQ:PDD) was in 34 hedge funds' portfolios at the end of September. The all time high for this statistic is 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PDD 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Bart Baum of Ionic Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind we're going to take a look at the fresh hedge fund action encompassing Pinduoduo Inc. (NASDAQ:PDD).
Do Hedge Funds Think PDD Is A Good Stock To Buy Now?
At the end of September, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PDD over the last 21 quarters. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Pinduoduo Inc. (NASDAQ:PDD) was held by Tiger Global Management LLC, which reported holding $1056.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $865.8 million position. Other investors bullish on the company included Hillhouse Capital Management, Altimeter Capital Management, and Fisher Asset Management. In terms of the portfolio weights assigned to each position Tairen Capital allocated the biggest weight to Pinduoduo Inc. (NASDAQ:PDD), around 12.61% of its 13F portfolio. Altimeter Capital Management is also relatively very bullish on the stock, dishing out 10.88 percent of its 13F equity portfolio to PDD.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the largest position in Pinduoduo Inc. (NASDAQ:PDD). Millennium Management had $51.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $16.2 million investment in the stock during the quarter. The other funds with brand new PDD positions are D. E. Shaw's D E Shaw, Campbell Wilson's Old Well Partners, and Bart Baum's Ionic Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Pinduoduo Inc. (NASDAQ:PDD) but similarly valued. These stocks are Raytheon Technologies Corp (NYSE:RTX), S&P Global Inc. (NYSE:SPGI), BlackRock, Inc. (NYSE:BLK), Intuit Inc. (NASDAQ:INTU), Toronto-Dominion Bank (NYSE:TD), Intuitive Surgical, Inc. (NASDAQ:ISRG), and British American Tobacco plc (NYSE:BTI). This group of stocks' market caps match PDD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RTX,55,2988856,-4 SPGI,71,3030583,0 BLK,39,922746,2 INTU,54,1822831,1 TD,15,97067,0 ISRG,50,1351177,7 BTI,7,702239,-4 Average,41.6,1559357,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.6 hedge funds with bullish positions and the average amount invested in these stocks was $1559 million. That figure was $4331 million in PDD's case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSE:BTI) is the least popular one with only 7 bullish hedge fund positions. Pinduoduo Inc. (NASDAQ:PDD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PDD is 60.1. 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 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on PDD as the stock returned 101.4% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.