Is Momo Inc (MOMO) Going to Burn These Hedge Funds?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Momo Inc (NASDAQ:MOMO).

Momo Inc (NASDAQ:MOMO) investors should pay attention to an increase in hedge fund interest in recent months. Momo Inc (NASDAQ:MOMO) was in 25 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that MOMO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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James Dinan of York Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a glance at the new hedge fund action regarding Momo Inc (NASDAQ:MOMO).

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

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in MOMO a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

The largest stake in Momo Inc (NASDAQ:MOMO) was held by Renaissance Technologies, which reported holding $201.1 million worth of stock at the end of December. It was followed by Tiger Pacific Capital with a $28.4 million position. Other investors bullish on the company included Yiheng Capital, Islet Management, and York Capital Management. In terms of the portfolio weights assigned to each position Tiger Pacific Capital allocated the biggest weight to Momo Inc (NASDAQ:MOMO), around 5.13% of its 13F portfolio. Symmetry Peak Management is also relatively very bullish on the stock, designating 2.54 percent of its 13F equity portfolio to MOMO.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in Momo Inc (NASDAQ:MOMO). Arrowstreet Capital had $10.7 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $9.6 million position during the quarter. The following funds were also among the new MOMO investors: Warren Lammert’s Granite Point Capital, Prem Watsa’s Fairfax Financial Holdings, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Momo Inc (NASDAQ:MOMO) but similarly valued. These stocks are Signet Jewelers Limited (NYSE:SIG), Integer Holdings Corporation (NYSE:ITGR), CommVault Systems, Inc. (NASDAQ:CVLT), Atlantic Union Bankshares Corporation (NASDAQ:AUB), John Wiley & Sons Inc (NYSE:JW), ExlService Holdings, Inc. (NASDAQ:EXLS), and PureCycle Technologies, Inc. (NASDAQ:PCT). This group of stocks’ market caps are closest to MOMO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SIG 26 945716 -4
ITGR 16 217349 -8
CVLT 23 533620 0
AUB 11 42633 3
JW 16 190834 2
EXLS 14 72523 -2
PCT 21 659105 21
Average 18.1 380254 1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $380 million. That figure was $342 million in MOMO’s case. Signet Jewelers Limited (NYSE:SIG) is the most popular stock in this table. On the other hand Atlantic Union Bankshares Corporation (NASDAQ:AUB) is the least popular one with only 11 bullish hedge fund positions. Momo Inc (NASDAQ:MOMO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MOMO is 69.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately MOMO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MOMO were disappointed as the stock returned -3.4% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 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.