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Should You Avoid FinVolution Group (FINV)?

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 FinVolution Group (NYSE:FINV).

FinVolution Group (NYSE:FINV) has seen a decrease in activity from the world’s largest hedge funds in recent months. FINV was in 4 hedge funds’ portfolios at the end of March. There were 6 hedge funds in our database with FINV positions at the end of the previous quarter. Our calculations also showed that FINV isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 gander at the latest hedge fund action encompassing FinVolution Group (NYSE:FINV).

What does smart money think about FinVolution Group (NYSE:FINV)?

At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in FINV a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander’s Millennium Management has the biggest position in FinVolution Group (NYSE:FINV), worth close to $2.7 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot of Renaissance Technologies, with a $1.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism include Seth Fischer’s Oasis Management, John Overdeck and David Siegel’s Two Sigma Advisors and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Oasis Management allocated the biggest weight to FinVolution Group (NYSE:FINV), around 0.15% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to FINV.

Due to the fact that FinVolution Group (NYSE:FINV) has experienced declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of money managers that decided to sell off their full holdings last quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $0.1 million in stock. Donald Sussman’s fund, Paloma Partners, also dropped its stock, about $0 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to FinVolution Group (NYSE:FINV). We will take a look at H&E Equipment Services, Inc. (NASDAQ:HEES), HomeStreet Inc (NASDAQ:HMST), BlackRock MuniVest Fund, Inc. (NYSE:MVF), and i3 Verticals, Inc. (NASDAQ:IIIV). All of these stocks’ market caps are similar to FINV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HEES 16 39998 1
HMST 13 38232 -2
MVF 1 906 0
IIIV 11 41532 -1
Average 10.25 30167 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $5 million in FINV’s case. H&E Equipment Services, Inc. (NASDAQ:HEES) is the most popular stock in this table. On the other hand BlackRock MuniVest Fund, Inc. (NYSE:MVF) is the least popular one with only 1 bullish hedge fund positions. FinVolution Group (NYSE:FINV) 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. 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 gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately FINV wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FINV investors were disappointed as the stock returned -8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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