Is BEST Inc. (BSTI) A Good Stock To Buy?

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second 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 positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards BEST Inc. (NYSE:BSTI).

BEST Inc. (NYSE:BSTI) has seen an increase in hedge fund sentiment in recent months. Our calculations also showed that bsti isn’t among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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.

Let’s review the recent hedge fund action surrounding BEST Inc. (NYSE:BSTI).

Hedge fund activity in BEST Inc. (NYSE:BSTI)

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards BSTI over the last 13 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with BSTI Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Run Ye, Junji Takegami and Hoyon Hwang’s Tiger Pacific Capital has the number one position in BEST Inc. (NYSE:BSTI), worth close to $27.6 million, corresponding to 14.2% of its total 13F portfolio. Sitting at the No. 2 spot is NWI Management, managed by Hari Hariharan, which holds a $6.7 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include David Kowitz and Sheldon Kasowitz’s Indus Capital, Shashin Shah’s Think Investments and Ram Seshan Venkateswaran’s Vernier Capital.

As one would reasonably expect, specific money managers have jumped into BEST Inc. (NYSE:BSTI) headfirst. Dalton Investments, managed by Gifford Combs, created the largest position in BEST Inc. (NYSE:BSTI). Dalton Investments had $0.9 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp and Matthew Tewksbury’s Stevens Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to BEST Inc. (NYSE:BSTI). We will take a look at Callaway Golf Company (NYSE:ELY), Cavco Industries, Inc. (NASDAQ:CVCO), Glaukos Corporation (NYSE:GKOS), and Monro, Inc. (NASDAQ:MNRO). This group of stocks’ market caps match BSTI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ELY 27 218969 1
CVCO 19 207373 -1
GKOS 14 155052 5
MNRO 10 171029 -3
Average 17.5 188106 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $54 million in BSTI’s case. Callaway Golf Company (NYSE:ELY) is the most popular stock in this table. On the other hand Monro, Inc. (NASDAQ:MNRO) is the least popular one with only 10 bullish hedge fund positions. BEST Inc. (NYSE:BSTI) 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. In this regard ELY might be a better candidate to consider a long position.

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