JD.Com Inc (ADR) (JD) Sinking on SEC Probe of Alibaba

JD.Com Inc (ADR) (NASDAQ:JD) is 3.6% in the red due to relative valuation. Because Alibaba Group Holding Ltd (BABA) shares are off by more than 5% today, some traders are selling JD.Com Inc (ADR) (NASDAQ:JD) on the basis that JD.com should be worth some percentage of Alibaba intrinsically. Alibaba shares are down today after it was revealed that the SEC is investigating the company over its accounting practices. The SEC is specifically investigating Alibaba’s consolidation practices relating to the data reported from the company’s Singles’ Day promotion. The probe could also be dampening investors’ enthusiasm for Chinese stocks in general today, which could also explain part of the selloff.

JD.Com Inc (ADR) (NASDAQ:JD) was in 73 hedge funds’ portfolios at the end of the first quarter of 2016. JD has experienced a decrease in enthusiasm from smart money of late. There were 78 hedge funds in our database with JD holdings at the end of the previous quarter. However, it should be noted that the 73 hedge funds long JD.Com on March 31 held an impressive 39.40% of the company’s shares, so they remain extremely bullish collectively. At the end of this article we will also compare JD to other stocks including Pioneer Natural Resources (NYSE:PXD), Hormel Foods Corporation (NYSE:HRL), and TE Connectivity Ltd. (NYSE:TEL) to get a better sense of its popularity.

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According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Hillhouse Capital Management, managed by Lei Zhang, holds the biggest position in JD.Com Inc (ADR) (NASDAQ:JD). Hillhouse Capital Management has a $3.27 billion position in the stock, comprising 71.3% of its 13F portfolio. Sitting at the No. 2 spot is Tiger Global Management LLC, managed by Chase Coleman, which holds a $1.17 billion position; the fund has 16.8% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain William B. Gray’s Orbis Investment Management, Stephen Mandel’s Lone Pine Capital, and Philippe Laffont’s Coatue Management.

On the next page we’ll look at some funds that sold off positions in JD.Com during Q1, as well as compare the stock to a handful of others with similar market caps.

Seeing as JD.Com Inc (ADR) (NASDAQ:JD) has faced bearish sentiment from the smart money, we can see that there lies a certain “tier” of money managers who sold off their positions entirely last quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the largest position of all the hedgies followed by Insider Monkey, valued at about $138 million in stock. Eric W. Mandelblatt’s fund, Soroban Capital Partners, also dumped its stock, about $137.5 million worth. These transactions are interesting, as total hedge fund interest was cut by 5 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to JD.Com Inc (ADR) (NASDAQ:JD). These stocks are Pioneer Natural Resources (NYSE:PXD), Hormel Foods Corporation (NYSE:HRL), TE Connectivity Ltd. (NYSE:TEL), and Fiserv, Inc. (NASDAQ:FISV). This group of stocks’ market caps are similar to JD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PXD 61 3177629 4
HRL 21 254674 6
TEL 27 965112 0
FISV 24 391667 -3

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1.20 billion. That figure was $9.11 billion in JD’s case. Pioneer Natural Resources (NYSE:PXD) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks JD.Com Inc (ADR) (NASDAQ:JD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers and have a ton of money invested in it, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None