Do Hedge Funds Love Xinyuan Real Estate Co., Ltd. (XIN)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Xinyuan Real Estate Co., Ltd. (NYSE:XIN).

Xinyuan Real Estate Co., Ltd. (NYSE:XIN) was in 3 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. XIN has seen an increase in support from the world’s most elite money managers lately. There were 2 hedge funds in our database with XIN positions at the end of the second quarter. Our calculations also showed that XIN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.


Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s take a gander at the new hedge fund action surrounding Xinyuan Real Estate Co., Ltd. (NYSE:XIN).

How have hedgies been trading Xinyuan Real Estate Co., Ltd. (NYSE:XIN)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the second quarter of 2020. On the other hand, there were a total of 5 hedge funds with a bullish position in XIN a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Xinyuan Real Estate Co., Ltd. (NYSE:XIN), which was worth $0.4 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $0.1 million worth of shares. Citadel Investment Group was 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 Renaissance Technologies allocated the biggest weight to Xinyuan Real Estate Co., Ltd. (NYSE:XIN), around 0.0004% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, setting aside 0.0002 percent of its 13F equity portfolio to XIN.

Consequently, key money managers have jumped into Xinyuan Real Estate Co., Ltd. (NYSE:XIN) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in Xinyuan Real Estate Co., Ltd. (NYSE:XIN). Citadel Investment Group had $0 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Xinyuan Real Estate Co., Ltd. (NYSE:XIN) but similarly valued. We will take a look at Plumas Bancorp (NASDAQ:PLBC), ReneSola Ltd. (NYSE:SOL), Mackinac Financial Corporation (NASDAQ:MFNC), Information Services Group, Inc. (NASDAQ:III), MainStreet Bancshares, Inc. (NASDAQ:MNSB), Aesthetic Medical International Holdings Group Ltd. (NASDAQ:AIH), and Enzo Biochem, Inc. (NYSE:ENZ). All of these stocks’ market caps resemble XIN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLBC 1 4439 0
SOL 5 31435 2
MFNC 6 7619 2
III 5 18567 0
MNSB 2 7282 -1
AIH 1 181 0
ENZ 10 26753 2
Average 4.3 13754 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.3 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $1 million in XIN’s case. Enzo Biochem, Inc. (NYSE:ENZ) is the most popular stock in this table. On the other hand Plumas Bancorp (NASDAQ:PLBC) is the least popular one with only 1 bullish hedge fund positions. Xinyuan Real Estate Co., Ltd. (NYSE:XIN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for XIN is 28.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of quant hedge funds were also right about betting on XIN as the stock returned 12.6% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.

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