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Bullish Hedge Fund Bets On Sea Limited (SE) Hit All Time High

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Sea Limited (NYSE:SE) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Sea Limited (NYSE:SE) was in 82 hedge funds’ portfolios at the end of June. The all time high for this statistics was 76 previously. This means the bullish number of hedge fund positions in this stock reached its all time high. SE has seen an increase in activity from the world’s largest hedge funds of late. There were 76 hedge funds in our database with SE positions at the end of the previous quarter. Our calculations also showed that SE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s take a look at the key hedge fund action surrounding Sea Limited (NYSE:SE).

Hedge fund activity in Sea Limited (NYSE:SE)

At Q2’s end, a total of 82 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SE over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Tiger Global Management LLC held the most valuable stake in Sea Limited (NYSE:SE), which was worth $896.4 million at the end of the third quarter. On the second spot was Composite Capital which amassed $625 million worth of shares. Kora Management, GQG Partners, and Coatue Management 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 Karst Peak Capital allocated the biggest weight to Sea Limited (NYSE:SE), around 73.71% of its 13F portfolio. Kora Management is also relatively very bullish on the stock, setting aside 67.45 percent of its 13F equity portfolio to SE.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Tybourne Capital Management, managed by Eashwar Krishnan, assembled the most valuable position in Sea Limited (NYSE:SE). Tybourne Capital Management had $208.1 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also made a $134.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital, and Robert Pitts’s Steadfast Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Sea Limited (NYSE:SE). These stocks are Truist Financial Corporation (NYSE:TFC), CNOOC Limited (NYSE:CEO), Boston Scientific Corporation (NYSE:BSX), Intercontinental Exchange Inc (NYSE:ICE), The Bank of Nova Scotia (NYSE:BNS), Newmont Corporation (NYSE:NEM), and Deere & Company (NYSE:DE). This group of stocks’ market valuations are closest to SE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TFC 33 287639 -1
CEO 13 166646 2
BSX 66 2312667 7
ICE 60 2754652 -1
BNS 13 252173 1
NEM 55 2418239 12
DE 32 839882 -12
Average 38.9 1290271 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.9 hedge funds with bullish positions and the average amount invested in these stocks was $1290 million. That figure was $6358 million in SE’s case. Boston Scientific Corporation (NYSE:BSX) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Sea Limited (NYSE:SE) is more popular among hedge funds. Our overall hedge fund sentiment score for SE is 90. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 28.2% in 2020 through August 24th but still managed to beat the market by 20.6 percentage points. Hedge funds were also right about betting on SE as the stock returned 40.3% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.