We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds' top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 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 Viomi Technology Co., Ltd (NASDAQ:VIOT).
Hedge fund interest in Viomi Technology Co., Ltd (NASDAQ:VIOT) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare VIOT to other stocks including McEwen Mining Inc (NYSE:MUX), International Seaways, Inc. (NYSE:INSW), and Crawford & Company (NYSE:CRD) to get a better sense of its popularity.
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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_27676" align="aligncenter" width="355"] Israel Englander of Millennium Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the key hedge fund action surrounding Viomi Technology Co., Ltd (NASDAQ:VIOT).
Hedge fund activity in Viomi Technology Co., Ltd (NASDAQ:VIOT)
Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VIOT over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Wang Chan's Serenity Capital has the largest position in Viomi Technology Co., Ltd (NASDAQ:VIOT), worth close to $22.9 million, corresponding to 5.3% of its total 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $1.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Serenity Capital allocated the biggest weight to Viomi Technology Co., Ltd (NASDAQ:VIOT), around 5.28% of its portfolio. Millennium Management is also relatively very bullish on the stock, earmarking 0.0017 percent of its 13F equity portfolio to VIOT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Renaissance Technologies).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Viomi Technology Co., Ltd (NASDAQ:VIOT) but similarly valued. We will take a look at McEwen Mining Inc (NYSE:MUX), International Seaways, Inc. (NYSE:INSW), Crawford & Company (NYSE:CRD), and The Bancorp, Inc. (NASDAQ:TBBK). This group of stocks' market caps are similar to VIOT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MUX,4,5621,0 INSW,21,158072,6 CRD,14,36590,3 TBBK,18,84515,1 Average,14.25,71200,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $24 million in VIOT's case. International Seaways, Inc. (NYSE:INSW) is the most popular stock in this table. On the other hand McEwen Mining Inc (NYSE:MUX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Viomi Technology Co., Ltd (NASDAQ:VIOT) is even less popular than MUX. Hedge funds clearly dropped the ball on VIOT as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. A small number of hedge funds were also right about betting on VIOT as the stock returned 9.2% during the fourth quarter (through 11/22) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.