Several hedge fund billionaires took advantage of the sharp declines in broader market indices during the 5 hours following Donald Trump’s election victory. In this case markets wised up pretty quickly and the selloffs turned into rallies. Information disseminates very quickly in liquid markets, however, the rate of adjustment is usually slower when it comes to much smaller and less liquid markets. By tracking the hedge fund sentiment in publicly traded US stocks Insider Monkey aims to tap into hedge funds’ wisdom without paying them an arm and a leg. Historically their stock picks in small-cap stocks proved to be the most profitable. Let’s study the hedge fund sentiment to see how recent events affected their ownership of JD.Com Inc (ADR) (NASDAQ:JD) during the third quarter.
JD.Com Inc (ADR) (NASDAQ:JD) was included in the 13F portfolios of 44 investors tracked by us at the end of September, but it’s worth mentioning that the company saw a decline in popularity over the quarter. There had been 51 funds with JD holdings at the end of June. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Wipro Limited (ADR) (NYSE:WIT), Edison International (NYSE:EIX), and Equity Residential (NYSE:EQR) to gather more data points.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
Keeping this in mind, we’re going to review the key action surrounding JD.Com Inc (ADR) (NASDAQ:JD).
How have hedgies been trading JD.Com Inc (ADR) (NASDAQ:JD)?
Heading into the fourth quarter of 2016, a total of 44 funds tracked by Insider Monkey held long positions in JD.com, down by 14% over the quarter. Below, you can check out the change in hedge fund sentiment towards JD over the last five quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Hillhouse Capital Management, led by Lei Zhang, holds the number one position in JD.Com Inc (ADR) (NASDAQ:JD). Hillhouse Capital Management has a $2.99 billion position in the stock, comprising 61.1% of its 13F portfolio. On Hillhouse Capital Management’s heels is Chase Coleman’s Tiger Global Management LLC holding a $873.1 million position; 12.6% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish consist of William B. Gray’s Orbis Investment Management, Andreas Halvorsen’s Viking Global, and David Blood and Al Gore’s Generation Investment Management. We should note that Orbis Investment Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Due to the fact that JD.Com Inc (ADR) (NASDAQ:JD) has weathered a decline in interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that slashed their entire stakes by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management dropped the biggest position of all the investors tracked by Insider Monkey, comprising about $34.6 million in stock. Glen Kacher’s fund, Light Street Capital, also said goodbye to its stock, valued at about $31.9 million.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as JD.Com Inc (ADR) (NASDAQ:JD) but similarly valued. We will take a look at Wipro Limited (ADR) (NYSE:WIT), Edison International (NYSE:EIX), Equity Residential (NYSE:EQR), and PPL Corporation (NYSE:PPL). All of these stocks’ market caps resemble JD’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 17 funds with bullish positions and the average amount invested in these stocks was $519 million, which is significantly lower than the $7.41 billion figure in JD’s case. PPL Corporation (NYSE:PPL) is the most popular stock in this table. On the other hand Wipro Limited (ADR) (NYSE:WIT) is the least popular one with only eight investors having reported long positions. Compared to these stocks JD.Com Inc (ADR) (NASDAQ:JD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.