With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was BEST Inc. (NYSE:BEST).
Is BEST Inc. (BEST) a good stock to buy now? BEST shareholders have witnessed an increase in hedge fund interest in recent months. BEST Inc. (NYSE:BEST) was in 8 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. Our calculations also showed that BEST isn’t 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.
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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let’s view the fresh hedge fund action encompassing BEST Inc. (NYSE:BEST).
What does smart money think about BEST Inc. (NYSE:BEST)?
At the end of September, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in BEST over the last 21 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in BEST Inc. (NYSE:BEST), which was worth $5.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $3.7 million worth of shares. Islet Management, Marshall Wace LLP, and Bridgewater Associates 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 Islet Management allocated the biggest weight to BEST Inc. (NYSE:BEST), around 0.1% of its 13F portfolio. Bridgewater Associates is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to BEST.
Now, specific money managers were breaking ground themselves. Islet Management, managed by Joseph Samuels, initiated the most outsized position in BEST Inc. (NYSE:BEST). Islet Management had $1.5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $1.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Donald Sussman’s Paloma Partners.
Let’s now take a look at hedge fund activity in other stocks similar to BEST Inc. (NYSE:BEST). These stocks are Herc Holdings Inc. (NYSE:HRI), Infinera Corp. (NASDAQ:INFN), Annexon, Inc. (NASDAQ:ANNX), EnLink Midstream LLC (NYSE:ENLC), Opera Limited (NASDAQ:OPRA), New Gold Inc. (NYSE:NGD), and SilverCrest Metals Inc. (NYSE:SILV). This group of stocks’ market values are similar to BEST’s market value.
|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 12.4 hedge funds with bullish positions and the average amount invested in these stocks was $190 million. That figure was $14 million in BEST’s case. Infinera Corp. (NASDAQ:INFN) is the most popular stock in this table. On the other hand Opera Limited (NASDAQ:OPRA) 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. Our overall hedge fund sentiment score for BEST is 34.5. 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. 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 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 gained 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately BEST wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BEST investors were disappointed as the stock returned -7.7% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.