Hedge Funds Keep Buying Sea Limited (SE)

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Sea Limited (NYSE:SE).

Sea Limited (NYSE:SE) was in 95 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 82. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SE has seen an increase in hedge fund sentiment lately. There were 82 hedge funds in our database with SE positions at the end of the second quarter. Our calculations also showed that SE ranked 20th among the 30 most popular stocks among hedge funds (click for Q3 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Philippe Laffont of Coatue Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to go over the fresh hedge fund action regarding Sea Limited (NYSE:SE).

What have hedge funds been doing with Sea Limited (NYSE:SE)?

At the end of September, a total of 95 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from one quarter earlier. On the other hand, there were a total of 69 hedge funds with a bullish position in SE a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in Sea Limited (NYSE:SE) was held by Tiger Global Management LLC, which reported holding $1287.7 million worth of stock at the end of September. It was followed by Kora Management with a $597.7 million position. Other investors bullish on the company included GQG Partners, Coatue Management, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Karst Peak Capital allocated the biggest weight to Sea Limited (NYSE:SE), around 76.96% of its 13F portfolio. Kora Management is also relatively very bullish on the stock, setting aside 69.97 percent of its 13F equity portfolio to SE.

Consequently, key hedge funds were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, created the most outsized position in Sea Limited (NYSE:SE). Holocene Advisors had $160.7 million invested in the company at the end of the quarter. Larry Chen and Terry Zhang’s Tairen Capital also made a $24.5 million investment in the stock during the quarter. The following funds were also among the new SE investors: Neal Nathani and Darren Dinneen’s Totem Point Management, Sander Gerber’s Hudson Bay Capital Management, and Phill Gross and Robert Atchinson’s Adage Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Sea Limited (NYSE:SE). We will take a look at Prologis Inc (NYSE:PLD), Square, Inc. (NYSE:SQ), Altria Group Inc (NYSE:MO), JD.Com Inc (NASDAQ:JD), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), KE Holdings Inc. (NYSE:BEKE) and Snowflake Inc. (NYSE:SNOW). This group of stocks’ market caps match SE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLD 33 518397 -2
SQ 73 6501994 7
MO 47 1259705 4
JD 85 13574479 -2
VRTX 55 3419082 1
BEKE 28 1327441 28
SNOW 59 4614302 59
Average 54.3 4459343 13.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 54.3 hedge funds with bullish positions and the average amount invested in these stocks was $4459 million. That figure was $7818 million in SE’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand KE Holdings Inc. (NYSE:BEKE) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Sea Limited (NYSE:SE) is more popular among hedge funds. Our overall hedge fund sentiment score for SE is 90.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 28.1% in 2020 through November 23rd but still managed to beat the market by 15.4 percentage points. Hedge funds were also right about betting on SE as the stock returned 18.7% since the end of September (through 11/23) 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.

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