In this article you are going to find out whether hedge funds think Vipshop Holdings Limited (NYSE:VIPS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Vipshop Holdings Limited (NYSE:VIPS) has experienced an increase in hedge fund sentiment recently. Our calculations also showed that VIPS 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.
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 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 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.
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 trades like this one. 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 let’s review the latest hedge fund action encompassing Vipshop Holdings Limited (NYSE:VIPS).
How are hedge funds trading Vipshop Holdings Limited (NYSE:VIPS)?
At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the fourth quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in VIPS a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Hillhouse Capital Management was the largest shareholder of Vipshop Holdings Limited (NYSE:VIPS), with a stake worth $109.8 million reported as of the end of September. Trailing Hillhouse Capital Management was Keywise Capital Management, which amassed a stake valued at $84.3 million. Arrowstreet Capital, GLG Partners, and Point72 Asset Management 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 Keywise Capital Management allocated the biggest weight to Vipshop Holdings Limited (NYSE:VIPS), around 22.83% of its 13F portfolio. Sensato Capital Management is also relatively very bullish on the stock, earmarking 6.42 percent of its 13F equity portfolio to VIPS.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Hillhouse Capital Management, managed by Lei Zhang, assembled the largest position in Vipshop Holdings Limited (NYSE:VIPS). Hillhouse Capital Management had $109.8 million invested in the company at the end of the quarter. Glen Kacher’s Light Street Capital also initiated a $32.1 million position during the quarter. The other funds with brand new VIPS positions are Leung Chi Kit’s Kadensa Capital, Dmitry Balyasny’s Balyasny Asset Management, and Louis Navellier’s Navellier & Associates.
Let’s now review hedge fund activity in other stocks similar to Vipshop Holdings Limited (NYSE:VIPS). We will take a look at Burlington Stores Inc (NYSE:BURL), Liberty Global plc (NASDAQ:LBTYA), Insulet Corporation (NASDAQ:PODD), and Occidental Petroleum Corporation (NYSE:OXY). This group of stocks’ market valuations match VIPS’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.25 hedge funds with bullish positions and the average amount invested in these stocks was $946 million. That figure was $554 million in VIPS’s case. Burlington Stores Inc (NYSE:BURL) is the most popular stock in this table. On the other hand Liberty Global plc (NASDAQ:LBTYA) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Vipshop Holdings Limited (NYSE:VIPS) is even less popular than LBTYA. Hedge funds dodged a bullet by taking a bearish stance towards VIPS. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market by 13.2 percentage points. Unfortunately VIPS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); VIPS investors were disappointed as the stock returned 11.3% 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.