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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Coupang, Inc. (NYSE:CPNG).
Coupang, Inc. (NYSE:CPNG) investors should be aware of a decrease in hedge fund interest in recent months. Coupang, Inc. (NYSE:CPNG) was in 33 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 40. Our calculations also showed that CPNG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Lee Ainslie of Maverick Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to review the recent hedge fund action encompassing Coupang, Inc. (NYSE:CPNG).
Do Hedge Funds Think CPNG Is A Good Stock To Buy Now?
At Q2's end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in CPNG a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Coupang, Inc. (NYSE:CPNG) was held by Greenoaks Capital, which reported holding $11747.3 million worth of stock at the end of June. It was followed by Maverick Capital with a $4509.3 million position. Other investors bullish on the company included SCGE Management, Foxhaven Asset Management, and Bill & Melinda Gates Foundation Trust. In terms of the portfolio weights assigned to each position Greenoaks Capital allocated the biggest weight to Coupang, Inc. (NYSE:CPNG), around 88.42% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, setting aside 42.35 percent of its 13F equity portfolio to CPNG.
Judging by the fact that Coupang, Inc. (NYSE:CPNG) has faced falling interest from hedge fund managers, it's easy to see that there exists a select few money managers who were dropping their full holdings in the second quarter. At the top of the heap, Jacob Rothschild's RIT Capital Partners dropped the biggest position of the 750 funds tracked by Insider Monkey, totaling about $620.5 million in stock. Sharlyn C. Heslam's fund, Stockbridge Partners, also sold off its stock, about $42.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 7 funds in the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to Coupang, Inc. (NYSE:CPNG). These stocks are Equinix, Inc. (REIT) (NASDAQ:EQIX), Snowflake Inc (NYSE:SNOW), Marsh & McLennan Companies, Inc. (NYSE:MMC), Chubb Limited (NYSE:CB), Baidu, Inc. (NASDAQ:BIDU), Westpac Banking Corporation (NYSE:WBK), and Fiserv, Inc. (NASDAQ:FISV). This group of stocks' market valuations are closest to CPNG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EQIX,33,1266516,-8 SNOW,70,12507692,-1 MMC,41,2537494,4 CB,42,1737776,1 BIDU,59,3474215,-30 WBK,4,38055,1 FISV,72,2655395,-3 Average,45.9,3459592,-5.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.9 hedge funds with bullish positions and the average amount invested in these stocks was $3460 million. That figure was $18043 million in CPNG's case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. Coupang, Inc. (NYSE:CPNG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CPNG is 44.1. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately CPNG wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CPNG investors were disappointed as the stock returned -28.4% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.