We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Vipshop Holdings Limited (NYSE:VIPS) and determine whether hedge funds skillfully traded this stock.
Is Vipshop Holdings Limited (NYSE:VIPS) a healthy stock for your portfolio? The best stock pickers were getting less optimistic. The number of bullish hedge fund positions shrunk by 6 lately. Vipshop Holdings Limited (NYSE:VIPS) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 54. Our calculations also showed that VIPS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Matthew Halbower of Pentwater Capital
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 view the fresh hedge fund action regarding Vipshop Holdings Limited (NYSE:VIPS).
Do Hedge Funds Think VIPS Is A Good Stock To Buy Now?
At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in VIPS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Vipshop Holdings Limited (NYSE:VIPS) was held by D E Shaw, which reported holding $114 million worth of stock at the end of September. It was followed by Hillhouse Capital Management with a $99.9 million position. Other investors bullish on the company included Half Sky Capital, Pentwater Capital Management, and Tiger Pacific Capital. In terms of the portfolio weights assigned to each position Half Sky Capital allocated the biggest weight to Vipshop Holdings Limited (NYSE:VIPS), around 19.8% of its 13F portfolio. Keywise Capital Management is also relatively very bullish on the stock, setting aside 10.11 percent of its 13F equity portfolio to VIPS.
Seeing as Vipshop Holdings Limited (NYSE:VIPS) has faced falling interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedgies that decided to sell off their full holdings in the third quarter. At the top of the heap, George Yang’s Anatole Investment Management said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, worth an estimated $183.6 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $58.7 million worth. These transactions are important to note, as total hedge fund interest dropped by 6 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Vipshop Holdings Limited (NYSE:VIPS). We will take a look at Tandem Diabetes Care Inc (NASDAQ:TNDM), Education Realty Trust, Inc. (NYSE:EDR), BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), Autoliv Inc. (NYSE:ALV), YETI Holdings, Inc. (NYSE:YETI), BRP Inc. (NASDAQ:DOOO), and People’s United Financial, Inc. (NASDAQ:PBCT). 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 |
|---|---|---|---|
| TNDM | 31 | 287129 | -1 |
| EDR | 20 | 3930122 | 20 |
| BJ | 24 | 129524 | 7 |
| ALV | 19 | 761532 | -4 |
| YETI | 29 | 255906 | -5 |
| DOOO | 16 | 119867 | -3 |
| PBCT | 19 | 222656 | -5 |
| Average | 22.6 | 815248 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $815 million. That figure was $560 million in VIPS’s case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 16 bullish hedge fund positions. Vipshop Holdings Limited (NYSE:VIPS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VIPS is 62.3. 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 positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, VIPS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VIPS were disappointed as the stock returned -16.4% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Vipshop Holdings Ltd (NYSE:VIPS)
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Disclosure: None. This article was originally published at Insider Monkey.
