Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Phoenix New Media Ltd (NYSE:FENG).
Is FENG a good stock to buy now? Phoenix New Media Ltd (NYSE:FENG) has seen an increase in hedge fund interest of late. Phoenix New Media Ltd (NYSE:FENG) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 11. There were 6 hedge funds in our database with FENG positions at the end of the second quarter. Our calculations also showed that FENG 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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 we’re going to take a look at the fresh hedge fund action encompassing Phoenix New Media Ltd (NYSE:FENG).
How are hedge funds trading Phoenix New Media Ltd (NYSE:FENG)?
Heading into the fourth quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in 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 FENG over the last 21 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, International Value Advisers was the largest shareholder of Phoenix New Media Ltd (NYSE:FENG), with a stake worth $2.1 million reported as of the end of September. Trailing International Value Advisers was Renaissance Technologies, which amassed a stake valued at $1.4 million. Polar Capital, Millennium Management, and Prelude Capital (previously Springbok Capital) 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 International Value Advisers allocated the biggest weight to Phoenix New Media Ltd (NYSE:FENG), around 0.24% of its 13F portfolio. Prelude Capital (previously Springbok Capital) is also relatively very bullish on the stock, earmarking 0.0043 percent of its 13F equity portfolio to FENG.
As one would reasonably expect, key money managers have been driving this bullishness. Prelude Capital (previously Springbok Capital), managed by Gavin Saitowitz and Cisco J. del Valle, established the most outsized position in Phoenix New Media Ltd (NYSE:FENG). Prelude Capital (previously Springbok Capital) had $0.1 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0 million position during the quarter. The only other fund with a brand new FENG position is Ken Griffin’s Citadel Investment Group.
Let’s now take a look at hedge fund activity in other stocks similar to Phoenix New Media Ltd (NYSE:FENG). These stocks are Electromed, Inc. (NYSE:ELMD), Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK), PAVmed Inc. (NASDAQ:PAVM), Beyond Air, Inc. (NASDAQ:XAIR), Dynagas LNG Partners LP (NYSE:DLNG), 22nd Century Group, Inc (NYSE:XXII), and Provident Financial Holdings, Inc. (NASDAQ:PROV). This group of stocks’ market values are closest to FENG’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 2.9 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $4 million in FENG’s case. Electromed, Inc. (NYSE:ELMD) is the most popular stock in this table. On the other hand Beyond Air, Inc. (NASDAQ:XAIR) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Phoenix New Media Ltd (NYSE:FENG) is more popular among hedge funds. Our overall hedge fund sentiment score for FENG is 78.8. 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 returned 31.6% in 2020 through December 2nd but still managed to beat the market by 16 percentage points. Hedge funds were also right about betting on FENG as the stock returned 103.3% since the end of September (through 12/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.