In this article we will take a look at whether hedge funds think JD.Com Inc (NASDAQ:JD) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
JD.Com Inc (NASDAQ:JD) was in 90 hedge funds’ portfolios at the end of the first quarter of 2020. JD shareholders have witnessed an increase in enthusiasm from smart money recently. There were 63 hedge funds in our database with JD positions at the end of the previous quarter. Our calculations also showed that JD is 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Andreas Halvorsen of Viking Global
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 check out this European marijuana stock pitch. We believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the fresh hedge fund action encompassing JD.Com Inc (NASDAQ:JD).
What have hedge funds been doing with JD.Com Inc (NASDAQ:JD)?
At the end of the first quarter, a total of 90 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 43% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in JD over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in JD.Com Inc (NASDAQ:JD) was held by Tiger Global Management LLC, which reported holding $2051.3 million worth of stock at the end of September. It was followed by Viking Global with a $763.8 million position. Other investors bullish on the company included D1 Capital Partners, Hillhouse Capital Management, and Coatue Management. In terms of the portfolio weights assigned to each position Kontiki Capital allocated the biggest weight to JD.Com Inc (NASDAQ:JD), around 33.31% of its 13F portfolio. Kadensa Capital is also relatively very bullish on the stock, dishing out 15.32 percent of its 13F equity portfolio to JD.
As one would reasonably expect, key hedge funds were breaking ground themselves. Coatue Management, managed by Philippe Laffont, assembled the largest position in JD.Com Inc (NASDAQ:JD). Coatue Management had $395 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also initiated a $174.2 million position during the quarter. The other funds with brand new JD positions are Brandon Haley’s Holocene Advisors, Alex Sacerdote’s Whale Rock Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as JD.Com Inc (NASDAQ:JD) but similarly valued. We will take a look at Automatic Data Processing (NASDAQ:ADP), Enbridge Inc (NYSE:ENB), Allergan plc (NYSE:AGN), and Intuitive Surgical, Inc. (NASDAQ:ISRG). This group of stocks’ market caps resemble JD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADP | 46 | 1444924 | -5 |
| ENB | 25 | 297504 | 4 |
| AGN | 95 | 12598171 | 9 |
| ISRG | 50 | 964310 | -1 |
| Average | 54 | 3826227 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 54 hedge funds with bullish positions and the average amount invested in these stocks was $3826 million. That figure was $7920 million in JD’s case. Allergan plc (NYSE:AGN) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 25 bullish hedge fund positions. JD.Com Inc (NASDAQ:JD) is not the most popular stock in this group but hedge fund interest is still above average. 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 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on JD as the stock returned 23.2% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
