Federal funds future contracts suggest a 79% probability that the Federal Reserve will raise interest rates at the December policy meeting, an event which is expected to halt the U.S equities lengthy bull-run. Assuming this is the case, it is highly likely that hedge fund investors will prove their stock picking abilities once again, as they are widely-known for their ability to identify over and under-priced investments and deliver strong performance amid slow-moving markets. Leaving the discussion about hedge funds’ stock picking skills aside, this article will examine three filings submitted by several top hedge funds that will offer up-to-date insights about these investors’ stances on some of their favored stocks.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
According to a 13G filed with the SEC, Chase Coleman’s Tiger Global Management owns 5.0 million American Depositary Shares of Autohome Inc. (ADR) (NYSE:ATHM), which can be exchanged for Class A ordinary shares at a ratio of one-to-one. This compares with the stake of 8.74 million ADSs reported during the latest round of 13F filings. The freshly-disclosed stake accounts for 9.9% of the company’s outstanding common stock. The Chinese auto information website has seen its stock decline by 14% this year, partially owing to increased concerns over China’s macroeconomic conditions. Autohome Inc. (ADR) (NYSE:ATHM) primarily generates its revenue from online ads and dealer subscription services, and has been successful in delivering substantial revenue growth so far, but investors might have had far greater expectations. Its net revenue for the third quarter reached $141.4 million, an increase of 64.9% year-over-year and exceeded the company’s guidance of $133.7 million-to-$139.1 million. China has been the world’s largest new-automobile market by sales volume for several years and is anticipated to become the largest electric car market this year, which might result in sustained revenue growth for Autohome.
Nevertheless, shares of Autohome are currently trading at a forward price-to-earnings ratio of 18.69, which is above the average of 17.44 for the companies contained in the S&P 500 Index. Hedge funds in our database were fleeing the stock during the third quarter, as the number of smart money investors with positions in the company halved to 12 quarter-over-quarter. Similarly, the value of their positions shrank to $419.53 million from $640.06 million during the three-month period. Rob Citrone’s Discovery Capital Management bucked that trend, purchasing a 766,000-share stake in Autohome Inc. (ADR) (NYSE:ATHM) during the third quarter.
Let’s head to the next page of this article, where we reveal fresh moves of Carl Icahn and James Flynn on two different companies.