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Did Hedge Funds Drop The Ball On Vipshop Holdings Limited (VIPS) ?

How do we determine whether Vipshop Holdings Limited (NYSE:VIPS) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is Vipshop Holdings Limited (NYSE:VIPS) worth your attention right now? The smart money is getting more bullish. The number of bullish hedge fund positions rose by 5 lately. Our calculations also showed that VIPS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). VIPS was in 22 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with VIPS positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s view the recent hedge fund action regarding Vipshop Holdings Limited (NYSE:VIPS).

How have hedgies been trading Vipshop Holdings Limited (NYSE:VIPS)?

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in VIPS over the last 17 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

More specifically, Keywise Capital Management was the largest shareholder of Vipshop Holdings Limited (NYSE:VIPS), with a stake worth $62.6 million reported as of the end of September. Trailing Keywise Capital Management was GLG Partners, which amassed a stake valued at $54.6 million. Renaissance Technologies, D E Shaw, and Point72 Asset 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 Keywise Capital Management allocated the biggest weight to Vipshop Holdings Limited (NYSE:VIPS), around 28.39% of its 13F portfolio. Indus Capital is also relatively very bullish on the stock, dishing out 2.86 percent of its 13F equity portfolio to VIPS.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, assembled the biggest position in Vipshop Holdings Limited (NYSE:VIPS). Point72 Asset Management had $17.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $7.3 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Hugh Sloane’s Sloane Robinson Investment Management, and Michael Gelband’s ExodusPoint Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Vipshop Holdings Limited (NYSE:VIPS). We will take a look at RealPage, Inc. (NASDAQ:RP), Casey’s General Stores, Inc. (NASDAQ:CASY), Guardant Health, Inc. (NASDAQ:GH), and AECOM (NYSE:ACM). This group of stocks’ market values are closest to VIPS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RP 31 569288 -2
CASY 16 103612 -2
GH 24 410215 5
ACM 26 956455 4
Average 24.25 509893 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $510 million. That figure was $244 million in VIPS’s case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand Casey’s General Stores, Inc. (NASDAQ:CASY) is the least popular one with only 16 bullish hedge fund positions. Vipshop Holdings Limited (NYSE:VIPS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on VIPS as the stock returned 43.3% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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