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Hexindai Inc. (HX): Hedge Funds In Wait-and-See Mode

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 Hexindai Inc. (NASDAQ:HX) based on that data.

Hexindai Inc. (NASDAQ:HX) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of the first quarter of 2020. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Charles & Colvard, Ltd. (NASDAQ:CTHR), Hermitage Offshore Services Ltd. (NYSE:PSV), and Acer Therapeutics Inc. (NASDAQ:ACER) to gather more data points. Our calculations also showed that HX 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 44 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.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the recent hedge fund action encompassing Hexindai Inc. (NASDAQ:HX).

What does smart money think about Hexindai Inc. (NASDAQ:HX)?

At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HX over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Hexindai Inc. (NASDAQ:HX), which was worth $0.4 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $0 million worth of shares. Citadel Investment Group was 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 Renaissance Technologies allocated the biggest weight to Hexindai Inc. (NASDAQ:HX), around 0.0004% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, setting aside 0.0001 percent of its 13F equity portfolio to HX.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Hexindai Inc. (NASDAQ:HX) but similarly valued. We will take a look at Charles & Colvard, Ltd. (NASDAQ:CTHR), Hermitage Offshore Services Ltd. (NYSE:PSV), Acer Therapeutics Inc. (NASDAQ:ACER), and Alimera Sciences Inc (NASDAQ:ALIM). This group of stocks’ market valuations are closest to HX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTHR 1 474 -1
PSV 1 7 0
ACER 3 2033 0
ALIM 6 3242 -1
Average 2.75 1439 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $0 million in HX’s case. Alimera Sciences Inc (NASDAQ:ALIM) is the most popular stock in this table. On the other hand Charles & Colvard, Ltd. (NASDAQ:CTHR) is the least popular one with only 1 bullish hedge fund positions. Hexindai Inc. (NASDAQ:HX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately HX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HX were disappointed as the stock returned 0% during the same time period 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 many of these stocks already outperformed the market so far this year.

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