It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Noah Holdings Limited (ADR) (NYSE:NOAH) during the quarter below.
Is Noah Holdings Limited (ADR) (NYSE:NOAH) a cheap stock to buy now? Investors who are in the know are in a pessimistic mood. The number of long hedge fund bets retreated by 3 recently. NOAH was in 7 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with NOAH holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as PMC-Sierra Inc (NASDAQ:PMCS), Apogee Enterprises, Inc. (NASDAQ:APOG), and Natus Medical Inc (NASDAQ:BABY) to gather more data points.
To the average investor there are plenty of indicators investors can use to size up stocks. A pair of the most underrated indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outclass the market by a significant margin (see the details here).
Now, we’re going to view the recent action encompassing Noah Holdings Limited (ADR) (NYSE:NOAH).
How are hedge funds trading Noah Holdings Limited (ADR) (NYSE:NOAH)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a slump of 30% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Kowitz and Sheldon Kasowitz’s Indus Capital has the biggest position in Noah Holdings Limited (ADR) (NYSE:NOAH), worth close to $12.5 million and corresponding to 1.7% of its total 13F portfolio. Coming in second is Keywise Capital Management, led by Fang Zheng, holding a $7.4 million stake; the fund has 13.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Jim Simons’s Renaissance Technologies.
Seeing as Noah Holdings Limited (ADR) (NYSE:NOAH) has experienced a declination in interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few money managers that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at about $1.5 million in stock. Richard Driehaus’s fund, Driehaus Capital, also sold off its holding, roughly $1 million worth of shares. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Noah Holdings Limited (ADR) (NYSE:NOAH). We will take a look at PMC-Sierra Inc (NASDAQ:PMCS), Apogee Enterprises, Inc. (NASDAQ:APOG), Natus Medical Inc (NASDAQ:BABY), and Gogo Inc (NASDAQ:GOGO). This group of stocks’ market caps are closest to NOAH’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $227 million. That figure was a minor $28 million in NOAH’s case. PMC-Sierra Inc (NASDAQ:PMCS) is the most popular stock in this table, while Gogo Inc (NASDAQ:GOGO) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Noah Holdings Limited (ADR) (NYSE:NOAH) is even less popular than GOGO. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.