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Hedge Fund Consensus Stocks vs. HDFC Bank Limited (HDB) In 2019

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.1% in 2019 (through December 23rd) and outperformed the broader market benchmark by 10.1 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

HDFC Bank Limited (NYSE:HDB) investors should be aware of an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that HDB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

If you’d ask most investors, hedge funds are viewed as unimportant, old investment tools of the past. While there are more than 8000 funds trading today, We look at the top tier of this group, about 750 funds. These hedge fund managers shepherd bulk of the smart money’s total asset base, and by paying attention to their first-class picks, Insider Monkey has come up with many investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

DUQUESNE CAPITAL

Stanley Druckenmiller of Duquesne Capital

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s take a glance at the recent hedge fund action surrounding HDFC Bank Limited (NYSE:HDB).

What does smart money think about HDFC Bank Limited (NYSE:HDB)?

At Q3’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in HDB a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, GQG Partners was the largest shareholder of HDFC Bank Limited (NYSE:HDB), with a stake worth $1020.5 million reported as of the end of September. Trailing GQG Partners was Fisher Asset Management, which amassed a stake valued at $453 million. Two Creeks Capital Management, Steadfast Capital Management, and Samlyn Capital 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 TPG-AXON Management LP allocated the biggest weight to HDFC Bank Limited (NYSE:HDB), around 12.91% of its 13F portfolio. Prince Street Capital Management is also relatively very bullish on the stock, setting aside 12.91 percent of its 13F equity portfolio to HDB.

As aggregate interest increased, key hedge funds have jumped into HDFC Bank Limited (NYSE:HDB) headfirst. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, assembled the largest position in HDFC Bank Limited (NYSE:HDB). LMR Partners had $56 million invested in the company at the end of the quarter. Stanley Druckenmiller’s Duquesne Capital also made a $48.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Shashin Shah’s Think Investments, and Josh Donfeld and David Rogers’s Castle Hook Partners.

Let’s go over hedge fund activity in other stocks similar to HDFC Bank Limited (NYSE:HDB). We will take a look at Uber Technologies, Inc. (NYSE:UBER), Intercontinental Exchange Inc (NYSE:ICE), The Sherwin-Williams Company (NYSE:SHW), and Marsh & McLennan Companies, Inc. (NYSE:MMC). This group of stocks’ market values are similar to HDB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UBER 45 3397033 -11
ICE 43 2290732 8
SHW 45 1587764 5
MMC 26 579695 -3
Average 39.75 1963806 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $1964 million. That figure was $2348 million in HDB’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Marsh & McLennan Companies, Inc. (NYSE:MMC) is the least popular one with only 26 bullish hedge fund positions. HDFC Bank Limited (NYSE:HDB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately HDB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HDB investors were disappointed as the stock returned 24.9% in 2019 (as of 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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