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Should You Avoid Momo Inc (MOMO)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Momo Inc (NASDAQ:MOMO) based on those filings.

Momo Inc (NASDAQ:MOMO) investors should be aware of a decrease in support from the world’s most elite money managers in recent months. MOMO was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. There were 38 hedge funds in our database with MOMO positions at the end of the previous quarter. Our calculations also showed that MOMO 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.

To most investors, hedge funds are seen as underperforming, outdated investment tools of yesteryear. While there are greater than 8000 funds with their doors open at present, Our researchers choose to focus on the aristocrats of this group, around 850 funds. These investment experts handle the majority of the smart money’s total asset base, and by monitoring their finest equity investments, Insider Monkey has unearthed a few investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy beat 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 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

TIGER MANAGEMENT

Julian Robertson of Tiger Management

We leave no stone unturned when looking for the next great investment idea. For example, 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 are checking out investment opportunities like these. 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 the 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 regarding Momo Inc (NASDAQ:MOMO).

How are hedge funds trading Momo Inc (NASDAQ:MOMO)?

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -34% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MOMO over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Momo Inc (NASDAQ:MOMO), with a stake worth $289.4 million reported as of the end of September. Trailing Renaissance Technologies was Platinum Asset Management, which amassed a stake valued at $82.1 million. Arrowstreet Capital, Yiheng Capital, and Kylin Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kylin Management allocated the biggest weight to Momo Inc (NASDAQ:MOMO), around 8.21% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, dishing out 7.78 percent of its 13F equity portfolio to MOMO.

Because Momo Inc (NASDAQ:MOMO) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there were a few hedgies that slashed their full holdings last quarter. It’s worth mentioning that Noam Gottesman’s GLG Partners said goodbye to the largest position of the 750 funds monitored by Insider Monkey, worth close to $25.4 million in stock. Fang Zheng’s fund, Keywise Capital Management, also dumped its stock, about $24.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 13 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Momo Inc (NASDAQ:MOMO) but similarly valued. These stocks are Pilgrim’s Pride Corporation (NASDAQ:PPC), Woori Financial Group Inc. (NYSE:WF), Quanta Services Inc (NYSE:PWR), and Etsy Inc (NASDAQ:ETSY). This group of stocks’ market values are closest to MOMO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPC 18 122135 -6
WF 3 2382 0
PWR 28 1509183 -16
ETSY 38 712742 -8
Average 21.75 586611 -7.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $587 million. That figure was $585 million in MOMO’s case. Etsy Inc (NASDAQ:ETSY) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 3 bullish hedge fund positions. Momo Inc (NASDAQ:MOMO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately MOMO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MOMO were disappointed as the stock returned -3.1% during the same time period 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 many of these stocks already outperformed the market so far this year.

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