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Hedge Funds Are Absolutely Crazy About Mercadolibre Inc (MELI)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of Mercadolibre Inc (NASDAQ:MELI).

Mercadolibre Inc (NASDAQ:MELI) shareholders have witnessed an increase in hedge fund sentiment recently. Our calculations also showed that MELI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 44 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Howard Marks of Oaktree Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“.  We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the new hedge fund action regarding Mercadolibre Inc (NASDAQ:MELI).

How have hedgies been trading Mercadolibre Inc (NASDAQ:MELI)?

At Q1’s end, a total of 60 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in MELI over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Among these funds, Generation Investment Management held the most valuable stake in Mercadolibre Inc (NASDAQ:MELI), which was worth $323.5 million at the end of the third quarter. On the second spot was GQG Partners which amassed $283.7 million worth of shares. Tybourne Capital Management, Alkeon Capital Management, and Viking Global 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 Prince Street Capital Management allocated the biggest weight to Mercadolibre Inc (NASDAQ:MELI), around 11.48% of its 13F portfolio. Kora Management is also relatively very bullish on the stock, setting aside 9.95 percent of its 13F equity portfolio to MELI.

As industrywide interest jumped, specific money managers have been driving this bullishness. GQG Partners, managed by Rajiv Jain, established the largest position in Mercadolibre Inc (NASDAQ:MELI). GQG Partners had $283.7 million invested in the company at the end of the quarter. Panayotis Takis Sparaggis’s Alkeon Capital Management also initiated a $206.5 million position during the quarter. The other funds with brand new MELI positions are Louis Bacon’s Moore Global Investments, Howard Marks’s Oaktree Capital Management, and Principal Global Investors’s Columbus Circle Investors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Mercadolibre Inc (NASDAQ:MELI) but similarly valued. We will take a look at Suncor Energy Inc. (NYSE:SU), Republic Services, Inc. (NYSE:RSG), IHS Markit Ltd. (NYSE:INFO), and eBay Inc (NASDAQ:EBAY). This group of stocks’ market values are closest to MELI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SU 30 766498 -9
RSG 32 709358 6
INFO 44 1159316 15
EBAY 52 3096036 1
Average 39.5 1432802 3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $1433 million. That figure was $2099 million in MELI’s case. eBay Inc (NASDAQ:EBAY) is the most popular stock in this table. On the other hand Suncor Energy Inc. (NYSE:SU) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Mercadolibre Inc (NASDAQ:MELI) is more popular among hedge funds. 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 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on MELI as the stock returned 72.2% so far in Q2 (through May 22nd) 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.

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