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While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Qudian Inc. (NYSE:QD).
Is Qudian (NYSE:QD) a good stock to buy now? QD was in 6 hedge funds' portfolios at the end of September. The all time high for this statistics is 22. QD has seen a decrease in support from the world's most elite money managers lately. There were 8 hedge funds in our database with QD holdings at the end of June. Our calculations also showed that QD 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.
To the average investor there are a large number of signals shareholders have at their disposal to size up publicly traded companies. A couple of the most underrated signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outpace the S&P 500 by a solid amount (see the details here).
Michael Gelband of ExodusPoint Capital
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. With all of this in mind let's take a peek at the fresh hedge fund action encompassing Qudian Inc. (NYSE:QD).
How are hedge funds trading Qudian Inc. (NYSE:QD)?
At third quarter's end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in QD a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of Qudian Inc. (NYSE:QD), with a stake worth $4 million reported as of the end of September. Trailing Millennium Management was Arrowstreet Capital, which amassed a stake valued at $3.3 million. Citadel Investment Group, Citadel Investment Group, 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 Ovata Capital Management allocated the biggest weight to Qudian Inc. (NYSE:QD), around 0.02% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to QD.
Seeing as Qudian Inc. (NYSE:QD) has witnessed a decline in interest from hedge fund managers, we can see that there lies a certain "tier" of fund managers that slashed their full holdings by the end of the third quarter. It's worth mentioning that Renaissance Technologies said goodbye to the biggest position of the "upper crust" of funds followed by Insider Monkey, valued at close to $1.7 million in stock. Bruce Kovner's fund, Caxton Associates LP, also said goodbye to its stock, about $0.1 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to Qudian Inc. (NYSE:QD). We will take a look at Great Panther Mining Ltd (NYSE:GPL), The Container Store Group Inc (NYSE:TCS), Source Capital, Inc. (NYSE:SOR), Akoustis Technologies, Inc. (NASDAQ:AKTS), Heritage-Crystal Clean, Inc. (NASDAQ:HCCI), UFP Technologies, Inc. (NASDAQ:UFPT), and Bar Harbor Bankshares (NYSE:BHB). This group of stocks' market caps are closest to QD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPL,5,4961,1 TCS,14,181766,5 SOR,2,31699,-2 AKTS,6,12834,0 HCCI,11,37642,-1 UFPT,10,42285,3 BHB,2,4465,-1 Average,7.1,45093,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.1 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $9 million in QD's case. Container Store Group Inc (NYSE:TCS) is the most popular stock in this table. On the other hand Source Capital, Inc. (NYSE:SOR) is the least popular one with only 2 bullish hedge fund positions. Qudian Inc. (NYSE:QD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for QD is 27.8. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on QD as the stock returned 16.1% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.