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Where Does The Smart Money Stand On Pinduoduo Inc. (PDD)?

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  • PDD

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Pinduoduo Inc. (NASDAQ:PDD), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Pinduoduo Inc. (NASDAQ:PDD) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 49 hedge funds' portfolios at the end of September. Our calculations also showed that PDD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare PDD to other stocks including General Electric Company (NYSE:GE), Diageo plc (NYSE:DEO), and JD.Com Inc (NASDAQ:JD) to get a better sense of its popularity.

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 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. Keeping this in mind we're going to go over the new hedge fund action regarding Pinduoduo Inc. (NASDAQ:PDD).

Lei Zhang Hillhouse Capital
Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

Do Hedge Funds Think PDD Is A Good Stock To Buy Now?

At third quarter's end, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2021. On the other hand, there were a total of 34 hedge funds with a bullish position in PDD a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Pinduoduo Inc. (NASDAQ:PDD) was held by Tiger Global Management LLC, which reported holding $1274.2 million worth of stock at the end of September. It was followed by Tybourne Capital Management with a $317.3 million position. Other investors bullish on the company included Fisher Asset Management, Hillhouse Capital Management, and SCGE Management. In terms of the portfolio weights assigned to each position Tybourne Capital Management allocated the biggest weight to Pinduoduo Inc. (NASDAQ:PDD), around 7.99% of its 13F portfolio. Old Well Partners is also relatively very bullish on the stock, dishing out 5.52 percent of its 13F equity portfolio to PDD.

Seeing as Pinduoduo Inc. (NASDAQ:PDD) has faced a decline in interest from hedge fund managers, we can see that there were a few hedgies that slashed their full holdings by the end of the third quarter. At the top of the heap, Run Ye, Junji Takegami and Hoyon Hwang's Tiger Pacific Capital dumped the largest stake of the "upper crust" of funds monitored by Insider Monkey, comprising an estimated $72.9 million in stock. Charles Huang's fund, IvyRock Asset Management, also sold off its stock, about $29 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Pinduoduo Inc. (NASDAQ:PDD) but similarly valued. We will take a look at General Electric Company (NYSE:GE), Diageo plc (NYSE:DEO), JD.Com Inc (NASDAQ:JD), CVS Health Corporation (NYSE:CVS), Target Corporation (NYSE:TGT), Anheuser-Busch InBev SA/NV (NYSE:BUD), and Square, Inc. (NYSE:SQ). All of these stocks' market caps are closest to PDD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GE,53,6244560,-14 DEO,18,703948,-2 JD,66,9057155,-10 CVS,61,1060624,-6 TGT,49,4349899,-17 BUD,11,826303,-7 SQ,98,8884931,4 Average,50.9,4446774,-7.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.9 hedge funds with bullish positions and the average amount invested in these stocks was $4447 million. That figure was $3538 million in PDD's case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 11 bullish hedge fund positions. Pinduoduo Inc. (NASDAQ:PDD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PDD is 53.1. 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 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately PDD wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PDD investors were disappointed as the stock returned -26.7% since the end of September (through 11/30) 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.