Daniel S. Och‘s OZ Management has initiated a stake in the cratering Bitauto Hldg Ltd (ADR) (NYSE:BITA), purchasing some 3.31 million shares valued at $154.61 million of the company, according to a recent 13G form filed with the Securities and Exchange Commission. The holding amasses about 5.22% of the $2.80 billion company’s outstanding shares.
The New York-based Och-Ziff Capital Management, or OZ Management for short, is one of the world’s largest hedge funds, with about $67.1 billion in regulatory assets under its management. The investment firm, which was established in 1994, employs a multi-geography approach and also has offices in London, Mumbai, Beijing, and Hong Kong. The technology sector constitutes about 20% of the firm’s public equity portfolio.
An everyday investor does not have the time or the required skill-set to carry out an in-depth analysis of equities and identify companies with the best future prospects like a fund with the knowledge and resources of OZ Management can. However, it is also not a good idea to pay the egregiously high fees that investment firms charge for their stock picking expertise. Thus a retail investor is better off to monkey the most popular stock picks among hedge funds by him or herself. But not just any picks mind you. Our research has shown that a portfolio based on hedge funds’ top stock picks (which are invariably comprised entirely of large-cap companies) falls considerably short of a portfolio based on their best small-cap stock picks. The most popular large-cap stocks among hedge funds underperformed the market by an average of seven basis points per month in our back tests whereas the 15 most popular small-cap stock picks among hedge funds outperformed the market by nearly a percentage point per month over the same period between 1999 and 2012. Since officially launching our small-cap strategy in August 2012 it has performed just as predicted, beating the market by over 80 percentage points and returning over 139%, while hedge funds themselves have collectively underperformed the market (read the details here).
Bitauto Hldg Ltd (ADR) (NYSE:BITA), the operator of the bitauto.com and taoche.com websites, which provide information on new and used automobiles along with promotions and consumer feedback of China’s automotive industry, has been hit hard by the recent sell-off on the Shanghai Stock Exchange and an overall weakness in the Chinese economy.