Hedge Funds Are Warming Up To Baozun Inc (BZUN)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Baozun Inc (NASDAQ:BZUN).

Baozun Inc (NASDAQ:BZUN) was in 16 hedge funds’ portfolios at the end of the third quarter of 2019. BZUN has seen an increase in activity from the world’s largest hedge funds recently. There were 13 hedge funds in our database with BZUN positions at the end of the previous quarter. Our calculations also showed that BZUN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are a multitude of signals stock market investors employ to appraise publicly traded companies. A couple of the most under-the-radar signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass the market by a superb amount (see the details here).

Ken Griffin

Ken Griffin of Citadel Investment Group

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. Now we’re going to review the latest hedge fund action regarding Baozun Inc (NASDAQ:BZUN).

What have hedge funds been doing with Baozun Inc (NASDAQ:BZUN)?

At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the second quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in BZUN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BZUN A Good Stock To Buy?

The largest stake in Baozun Inc (NASDAQ:BZUN) was held by Indus Capital, which reported holding $15.6 million worth of stock at the end of September. It was followed by HBK Investments with a $10.1 million position. Other investors bullish on the company included Citadel Investment Group, Kylin Management, and Oasis Management. In terms of the portfolio weights assigned to each position Oasis Management allocated the biggest weight to Baozun Inc (NASDAQ:BZUN), around 3.6% of its 13F portfolio. Indus Capital is also relatively very bullish on the stock, setting aside 2.6 percent of its 13F equity portfolio to BZUN.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Oasis Management, managed by Seth Fischer, created the largest position in Baozun Inc (NASDAQ:BZUN). Oasis Management had $5.7 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $1.5 million position during the quarter. The following funds were also among the new BZUN investors: Donald Sussman’s Paloma Partners, Michael Gelband’s ExodusPoint Capital, and Ray Dalio’s Bridgewater Associates.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Baozun Inc (NASDAQ:BZUN) but similarly valued. These stocks are Sotheby’s (NYSE:BID), Nevro Corp (NYSE:NVRO), Boyd Gaming Corporation (NYSE:BYD), and DouYu International Holdings Limited (NASDAQ:DOYU). This group of stocks’ market values are closest to BZUN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BID 18 702089 -2
NVRO 21 632361 -7
BYD 25 214519 -5
DOYU 10 50432 10
Average 18.5 399850 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $400 million. That figure was $58 million in BZUN’s case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand DouYu International Holdings Limited (NASDAQ:DOYU) is the least popular one with only 10 bullish hedge fund positions. Baozun Inc (NASDAQ:BZUN) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BZUN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BZUN investors were disappointed as the stock returned -11.1% during the first two months of the fourth quarter and underperformed 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 70 percent of these stocks already outperformed the market in Q4.

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