Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Sinovac Biotech Ltd. (NASDAQ:SVA) was in 6 hedge funds’ portfolios at the end of September. SVA investors should be aware of an increase in activity from the world’s largest hedge funds lately. There were 4 hedge funds in our database with SVA 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 CommunityOne Bancorp (NASDAQ:COB), Bill Barrett Corporation (NYSE:BBG), and Cloud Peak Energy Inc. (NYSE:CLD) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How are hedge funds trading Sinovac Biotech Ltd. (NASDAQ:SVA)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 50% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in SVA heading at the end of Q3 2015, so hedge fund ownership is still down by 1 fund since then. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Samuel Isaly’s OrbiMed Advisors has the number one position in Sinovac Biotech Ltd. (NASDAQ:SVA), worth close to $15.7 million. Sitting at the No. 2 spot is Renaissance Technologies, one of the largest hedge funds in the world, which holds an $8.7 million position. Other hedge funds and institutional investors that hold long positions include Brian Taylor’s Pine River Capital Management, Noam Gottesman’s GLG Partners, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
As aggregate interest increased, specific money managers were breaking ground themselves. Pine River Capital Management initiated the most outsized position in Sinovac Biotech Ltd. (NASDAQ:SVA). Pine River Capital Management had $0.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.1 million investment in the stock during the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sinovac Biotech Ltd. (NASDAQ:SVA) but similarly valued. We will take a look at CommunityOne Bancorp (NASDAQ:COB), Bill Barrett Corporation (NYSE:BBG), Cloud Peak Energy Inc. (NYSE:CLD), and PennyMac Mortgage Investment Trust (NASDAQ:PMTS). All of these stocks’ market caps match SVA’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 12 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $26 million in SVA’s case. Bill Barrett Corporation (NYSE:BBG) is the most popular stock in this table. On the other hand CommunityOne Bancorp (NASDAQ:COB) is the least popular one with only 4 bullish hedge fund positions. Sinovac Biotech Ltd. (NASDAQ:SVA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BBG might be a better candidate to consider taking a long position in.