As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Weibo Corporation (NASDAQ:WB).
Weibo Corporation (NASDAQ:WB) investors should pay attention to a decrease in hedge fund sentiment of late. WB was in 14 hedge funds' portfolios at the end of September. There were 16 hedge funds in our database with WB positions at the end of the previous quarter. Our calculations also showed that WB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_339612" align="aligncenter" width="450"] Kerr Neilson of Platinum Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to go over the recent hedge fund action regarding Weibo Corporation (NASDAQ:WB).
What does smart money think about Weibo Corporation (NASDAQ:WB)?
Heading into the fourth quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WB over the last 17 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, Fisher Asset Management held the most valuable stake in Weibo Corporation (NASDAQ:WB), which was worth $180 million at the end of the third quarter. On the second spot was Platinum Asset Management which amassed $138.6 million worth of shares. Ariose Capital, PEAK6 Capital Management, and Moore Global Investments 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 Ariose Capital allocated the biggest weight to Weibo Corporation (NASDAQ:WB), around 20.9% of its 13F portfolio. Platinum Asset Management is also relatively very bullish on the stock, designating 3.1 percent of its 13F equity portfolio to WB.
Since Weibo Corporation (NASDAQ:WB) has experienced a decline in interest from hedge fund managers, logic holds that there lies a certain "tier" of funds who were dropping their positions entirely last quarter. Intriguingly, Howard Marks's Oaktree Capital Management said goodbye to the largest investment of the "upper crust" of funds tracked by Insider Monkey, totaling about $23.2 million in stock, and Anthony Bozza's Lakewood Capital Management was right behind this move, as the fund said goodbye to about $3.5 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Weibo Corporation (NASDAQ:WB). We will take a look at Whirlpool Corporation (NYSE:WHR), Packaging Corporation Of America (NYSE:PKG), Reinsurance Group of America, Incorporated (NYSE:RGA), and PulteGroup, Inc. (NYSE:PHM). This group of stocks' market caps match WB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WHR,28,978810,9 PKG,16,119433,-5 RGA,25,476554,-1 PHM,28,826294,-3 Average,24.25,600273,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $600 million. That figure was $353 million in WB's case. Whirlpool Corporation (NYSE:WHR) is the most popular stock in this table. On the other hand Packaging Corporation Of America (NYSE:PKG) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Weibo Corporation (NASDAQ:WB) is even less popular than PKG. Hedge funds dodged a bullet by taking a bearish stance towards WB. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately WB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); WB investors were disappointed as the stock returned -4.3% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.