Is GDS Stock A Buy or Sell?

At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not GDS Holdings Limited (NASDAQ:GDS) makes for a good investment right now.

Is GDS stock a buy or sell? The smart money was getting less bullish. The number of long hedge fund positions were cut by 8 recently. GDS Holdings Limited (NASDAQ:GDS) was in 39 hedge funds’ portfolios at the end of December. The all time high for this statistic is 47. Our calculations also showed that GDS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Rajiv Jain of GQG Partners

Rajiv Jain of GQG Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x 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. Keeping this in mind we’re going to take a gander at the key hedge fund action regarding GDS Holdings Limited (NASDAQ:GDS).

Do Hedge Funds Think GDS Is A Good Stock To Buy Now?

At Q4’s end, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GDS over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, 12 West Capital Management was the largest shareholder of GDS Holdings Limited (NASDAQ:GDS), with a stake worth $935.3 million reported as of the end of December. Trailing 12 West Capital Management was GQG Partners, which amassed a stake valued at $446.4 million. Tiger Global Management LLC, Hillhouse Capital Management, and Kylin Management 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 12 West Capital Management allocated the biggest weight to GDS Holdings Limited (NASDAQ:GDS), around 40.18% of its 13F portfolio. Kylin Management is also relatively very bullish on the stock, earmarking 24.71 percent of its 13F equity portfolio to GDS.

Because GDS Holdings Limited (NASDAQ:GDS) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there is a sect of money managers that elected to cut their positions entirely in the fourth quarter. It’s worth mentioning that Beeneet Kothari’s Tekne Capital Management cut the largest position of the 750 funds followed by Insider Monkey, comprising about $86.2 million in stock, and Glen Kacher’s Light Street Capital was right behind this move, as the fund sold off about $32.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 8 funds in the fourth quarter.

Let’s also examine hedge fund activity in other stocks similar to GDS Holdings Limited (NASDAQ:GDS). These stocks are Ubiquiti Inc. (NYSE:UI), CMS Energy Corporation (NYSE:CMS), China Unicom (Hong Kong) Limited (NYSE:CHU), CNH Industrial NV (NYSE:CNHI), Bio-Rad Laboratories, Inc. (NYSE:BIO), Fox Corporation (NASDAQ:FOXA), and Burlington Stores Inc (NYSE:BURL). This group of stocks’ market caps resemble GDS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UI 19 319456 -1
CMS 24 580991 -5
CHU 6 42062 0
CNHI 16 442785 -2
BIO 42 1117926 -6
FOXA 39 1293023 7
BURL 29 1335724 -1
Average 25 733138 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $733 million. That figure was $2874 million in GDS’s case. Bio-Rad Laboratories, Inc. (NYSE:BIO) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 6 bullish hedge fund positions. GDS Holdings Limited (NASDAQ:GDS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GDS is 67.7. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately GDS wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on GDS were disappointed as the stock returned -8.8% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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