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In this article we will check out the progression of hedge fund sentiment towards Viomi Technology Co., Ltd (NASDAQ:VIOT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Viomi Technology (VIOT) a good stock to buy now? VIOT shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. Viomi Technology Co., Ltd (NASDAQ:VIOT) was in 5 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 7. Our calculations also showed that VIOT 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
Paul Marshall of Marshall Wace
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 we're going to review the key hedge fund action surrounding Viomi Technology Co., Ltd (NASDAQ:VIOT).
Hedge fund activity in Viomi Technology Co., Ltd (NASDAQ:VIOT)
At third quarter's end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VIOT over the last 21 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Serenity Capital, managed by Wang Chan, holds the number one position in Viomi Technology Co., Ltd (NASDAQ:VIOT). Serenity Capital has a $17 million position in the stock, comprising 3.1% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $3.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of John Overdeck and David Siegel's Two Sigma Advisors, Paul Marshall and Ian Wace's Marshall Wace LLP and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Serenity Capital allocated the biggest weight to Viomi Technology Co., Ltd (NASDAQ:VIOT), around 3.12% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0035 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: Arrowstreet Capital. 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 none of the 750+ hedge funds tracked by Insider Monkey identified VIOT as a viable investment and initiated a position in the stock.
Let's now review hedge fund activity in other stocks similar to Viomi Technology Co., Ltd (NASDAQ:VIOT). These stocks are KNOT Offshore Partners LP (NYSE:KNOP), D8 Holdings Corp. (NYSE:DEH), Kala Pharmaceuticals, Inc. (NASDAQ:KALA), Univest Financial Corporation (NASDAQ:UVSP), Progenity, Inc. (NASDAQ:PROG), Triple-S Management Corp.(NYSE:GTS), and First Mid Bancshares, Inc. (NASDAQ:FMBH). All of these stocks' market caps match VIOT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KNOP,3,20830,-2 DEH,20,121167,20 KALA,18,142580,-1 UVSP,11,49515,-1 PROG,7,6786,-3 GTS,11,87709,1 FMBH,3,2962,0 Average,10.4,61650,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $21 million in VIOT's case. D8 Holdings Corp. (NYSE:DEH) is the most popular stock in this table. On the other hand KNOT Offshore Partners LP (NYSE:KNOP) is the least popular one with only 3 bullish hedge fund positions. Viomi Technology Co., Ltd (NASDAQ:VIOT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VIOT is 31.3. 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately VIOT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VIOT investors were disappointed as the stock returned -6.8% since the end of September (through 11/27) 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.