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Hedge Funds Aren’t Done Buying GDS Holdings Limited (GDS)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of GDS Holdings Limited (NASDAQ:GDS) based on that data.

GDS Holdings Limited (NASDAQ:GDS) has experienced an increase in enthusiasm from smart money recently. GDS was in 41 hedge funds’ portfolios at the end of March. There were 34 hedge funds in our database with GDS positions at the end of the previous quarter. Our calculations also showed that GDS 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.

At the moment there are a lot of signals market participants have at their disposal to grade stocks. A duo of the most under-the-radar signals are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outperform the S&P 500 by a solid amount (see the details here).

Glen Kacher of Light Street Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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. Now we’re going to take a gander at the fresh hedge fund action surrounding GDS Holdings Limited (NASDAQ:GDS).

How are hedge funds trading GDS Holdings Limited (NASDAQ:GDS)?

Heading into the second quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in GDS a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

More specifically, 12 West Capital Management was the largest shareholder of GDS Holdings Limited (NASDAQ:GDS), with a stake worth $634.3 million reported as of the end of September. Trailing 12 West Capital Management was Tiger Global Management LLC, which amassed a stake valued at $332.2 million. D E Shaw, Kylin Management, and Light Street 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 12 West Capital Management allocated the biggest weight to GDS Holdings Limited (NASDAQ:GDS), around 37.81% of its 13F portfolio. Kylin Management is also relatively very bullish on the stock, earmarking 24.77 percent of its 13F equity portfolio to GDS.

Consequently, some big names have been driving this bullishness. Cartica Management, managed by Teresa Barger, established the most outsized position in GDS Holdings Limited (NASDAQ:GDS). Cartica Management had $19.3 million invested in the company at the end of the quarter. Charles Clough’s Clough Capital Partners also made a $18.4 million investment in the stock during the quarter. The other funds with brand new GDS positions are Josh Resnick’s Jericho Capital Asset Management, Leung Chi Kit’s Kadensa Capital, and Joseph Samuels’s Islet Management.

Let’s now review hedge fund activity in other stocks similar to GDS Holdings Limited (NASDAQ:GDS). We will take a look at CarMax Inc (NYSE:KMX), Raymond James Financial, Inc. (NYSE:RJF), The Trade Desk, Inc. (NASDAQ:TTD), and Celanese Corporation (NYSE:CE). This group of stocks’ market values match GDS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KMX 37 1084332 -13
RJF 31 441370 3
TTD 25 393525 1
CE 29 509076 -2
Average 30.5 607076 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $607 million. That figure was $1618 million in GDS’s case. CarMax Inc (NYSE:KMX) is the most popular stock in this table. On the other hand The Trade Desk, Inc. (NASDAQ:TTD) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks GDS Holdings Limited (NASDAQ:GDS) 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 gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately GDS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GDS were disappointed as the stock returned -1.7% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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