In this article we will take a look at whether hedge funds think Baozun Inc (NASDAQ:BZUN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is BZUN a good stock to buy now? Prominent investors were buying. The number of long hedge fund bets moved up by 6 recently. Baozun Inc (NASDAQ:BZUN) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BZUN 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). There were 15 hedge funds in our database with BZUN holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Keeping this in mind we’re going to review the recent hedge fund action regarding Baozun Inc (NASDAQ:BZUN).
Do Hedge Funds Think BZUN Is A Good Stock To Buy Now?
At the end of September, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BZUN over the last 21 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in Baozun Inc (NASDAQ:BZUN), which was worth $12.8 million at the end of the third quarter. On the second spot was OZ Management which amassed $9.1 million worth of shares. Indus Capital, Citadel Investment Group, and Citadel Investment Group 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 Indus Capital allocated the biggest weight to Baozun Inc (NASDAQ:BZUN), around 1.18% of its 13F portfolio. Pinz Capital is also relatively very bullish on the stock, designating 0.97 percent of its 13F equity portfolio to BZUN.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the largest position in Baozun Inc (NASDAQ:BZUN). Marshall Wace LLP had $6 million invested in the company at the end of the quarter. Kenneth Tropin’s Graham Capital Management also made a $3.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Andrew Weiss’s Weiss Asset Management, Matthew L Pinz’s Pinz Capital, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to Baozun Inc (NASDAQ:BZUN). We will take a look at SeaWorld Entertainment Inc (NYSE:SEAS), Mueller Industries, Inc. (NYSE:MLI), Viela Bio, Inc. (NASDAQ:VIE), Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB), Sapiens International Corporation N.V. (NASDAQ:SPNS), MAG Silver Corporation (NYSE:MAG), and Ligand Pharmaceuticals Inc. (NASDAQ:LGND). All of these stocks’ market caps match BZUN’s market cap.
|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 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $254 million. That figure was $73 million in BZUN’s case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand Viela Bio, Inc. (NASDAQ:VIE) is the least popular one with only 5 bullish hedge fund positions. Baozun Inc (NASDAQ:BZUN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BZUN is 69.6. 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. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on BZUN, though not to the same extent, as the stock returned 9.7% since Q3 (through December 14th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.