Sea Limited (SE): Hedge Funds Sentiment Still At All Time High

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Sea Limited (NYSE:SE).

Sea Limited (NYSE:SE) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 76 hedge funds’ portfolios at the end of March. At the end of this article we will also compare SE to other stocks including IDEXX Laboratories, Inc. (NASDAQ:IDXX), Yum! Brands, Inc. (NYSE:YUM), and Johnson Controls International plc (NYSE:JCI) to get a better sense of its popularity. Overall hedge fund sentiment towards SE is still at its all time high, but SE isn’t one of the top 30 stocks among hedge funds (see the video below for top 5 hedge fund stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are tons of gauges stock traders use to grade stocks. A duo of the less utilized gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the elite investment managers can outpace the S&P 500 by a healthy margin (see the details here).

Chase Coleman Tiger Global Management

Chase Coleman of Tiger Global Management LLC

At Insider Monkey we leave no stone unturned when looking for the next great investment idea.  For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the key hedge fund action surrounding Sea Limited (NYSE:SE).

How are hedge funds trading Sea Limited (NYSE:SE)?

At Q1’s end, a total of 76 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SE over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in Sea Limited (NYSE:SE) was held by Tiger Global Management LLC, which reported holding $370.4 million worth of stock at the end of September. It was followed by Composite Capital with a $318 million position. Other investors bullish on the company included Kora Management, Coatue Management, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Kora Management allocated the biggest weight to Sea Limited (NYSE:SE), around 60.95% of its 13F portfolio. Composite Capital is also relatively very bullish on the stock, earmarking 60.17 percent of its 13F equity portfolio to SE.

Because Sea Limited (NYSE:SE) has faced a decline in interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies who were dropping their entire stakes last quarter. It’s worth mentioning that Scott Ferguson’s Sachem Head Capital dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $83.9 million in stock. Adam Leitzes’s fund, Karst Peak Capital, also cut its stock, about $56.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Sea Limited (NYSE:SE) but similarly valued. These stocks are IDEXX Laboratories, Inc. (NASDAQ:IDXX), Yum! Brands, Inc. (NYSE:YUM), Johnson Controls International plc (NYSE:JCI), and Kellogg Company (NYSE:K). This group of stocks’ market values are similar to SE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IDXX 31 517366 -6
YUM 41 558913 5
JCI 37 1063858 0
K 37 610512 7
Average 36.5 687662 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $688 million. That figure was $3132 million in SE’s case. Yum! Brands, Inc. (NYSE:YUM) is the most popular stock in this table. On the other hand IDEXX Laboratories, Inc. (NASDAQ:IDXX) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks Sea Limited (NYSE:SE) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on SE as the stock returned 78.3% so far in Q2 (through May 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.