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Hedge Funds Never Been Less Bullish On BEST Inc. (BEST)

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 BEST Inc. (NYSE:BEST) based on that data.

BEST Inc. (NYSE:BEST) investors should be aware of a decrease in activity from the world’s largest hedge funds lately. BEST was in 6 hedge funds’ portfolios at the end of March. There were 10 hedge funds in our database with BEST holdings at the end of the previous quarter. Our calculations also showed that BEST 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we’re going to review the recent hedge fund action regarding BEST Inc. (NYSE:BEST).

How have hedgies been trading BEST Inc. (NYSE:BEST)?

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from the fourth quarter of 2019. By comparison, 16 hedge funds held shares or bullish call options in BEST a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in BEST Inc. (NYSE:BEST) was held by Renaissance Technologies, which reported holding $4.9 million worth of stock at the end of September. It was followed by Millennium Management with a $2.6 million position. Other investors bullish on the company included D E Shaw, Weld Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to BEST Inc. (NYSE:BEST), around 0.12% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to BEST.

Seeing as BEST Inc. (NYSE:BEST) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedgies who were dropping their full holdings by the end of the first quarter. Intriguingly, Ken Griffin’s Citadel Investment Group dropped the biggest stake of all the hedgies tracked by Insider Monkey, comprising about $0.8 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund sold off about $0.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to BEST Inc. (NYSE:BEST). We will take a look at New Residential Investment Corp (NYSE:NRZ), Vishay Intertechnology, Inc. (NYSE:VSH), Simmons First National Corporation (NASDAQ:SFNC), and Diodes Incorporated (NASDAQ:DIOD). This group of stocks’ market caps are closest to BEST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NRZ 23 27836 0
VSH 23 266555 3
SFNC 4 2712 -2
DIOD 13 49641 -5
Average 15.75 86686 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $10 million in BEST’s case. New Residential Investment Corp (NYSE:NRZ) is the most popular stock in this table. On the other hand Simmons First National Corporation (NASDAQ:SFNC) is the least popular one with only 4 bullish hedge fund positions. BEST Inc. (NYSE:BEST) 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 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately BEST wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BEST investors were disappointed as the stock returned -1.9% during the second 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 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.