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 OneConnect Financial Technology Co., Ltd. (NYSE:OCFT).
Is OCFT a good stock to buy now? Money managers were taking a bullish view. The number of bullish hedge fund positions increased by 6 in recent months. OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OCFT 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.
According to most market participants, hedge funds are perceived as worthless, outdated financial vehicles of the past. While there are over 8000 funds in operation at present, Our experts hone in on the upper echelon of this club, about 850 funds. Most estimates calculate that this group of people administer most of all hedge funds’ total capital, and by keeping an eye on their inimitable equity investments, Insider Monkey has discovered a few investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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. With all of this in mind let’s view the new hedge fund action surrounding OneConnect Financial Technology Co., Ltd. (NYSE:OCFT).
Do Hedge Funds Think OCFT Is A Good Stock To Buy Now?
At third quarter’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 120% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OCFT over the last 21 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Kerr Neilson’s Platinum Asset Management has the most valuable position in OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), worth close to $27.2 million, accounting for 0.7% of its total 13F portfolio. Coming in second is Michael Gelband of ExodusPoint Capital, with a $4.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise David Halpert’s Prince Street Capital Management, Ted Kang’s Kylin Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Prince Street Capital Management allocated the biggest weight to OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), around 3.01% of its 13F portfolio. Kylin Management is also relatively very bullish on the stock, earmarking 1.29 percent of its 13F equity portfolio to OCFT.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Platinum Asset Management, managed by Kerr Neilson, created the most outsized position in OneConnect Financial Technology Co., Ltd. (NYSE:OCFT). Platinum Asset Management had $27.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $4.6 million position during the quarter. The other funds with new positions in the stock are Ted Kang’s Kylin Management, D. E. Shaw’s D E Shaw, and Ken Griffin’s Citadel Investment Group.
Let’s go over hedge fund activity in other stocks similar to OneConnect Financial Technology Co., Ltd. (NYSE:OCFT). We will take a look at Bentley Systems, Incorporated (NASDAQ:BSY), Nikola Corporation (NASDAQ:NKLA), Floor & Decor Holdings, Inc. (NYSE:FND), Repligen Corporation (NASDAQ:RGEN), Wynn Resorts, Limited (NASDAQ:WYNN), Mobile TeleSystems Public Joint Stock Company (NYSE:MBT), and XPO Logistics Inc (NYSE:XPO). This group of stocks’ market caps resemble OCFT’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 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $764 million. That figure was $47 million in OCFT’s case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand Mobile TeleSystems Public Joint Stock Company (NYSE:MBT) is the least popular one with only 10 bullish hedge fund positions. OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OCFT is 41.5. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately OCFT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); OCFT investors were disappointed as the stock returned -3.3% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.