Was The Smart Money Right About JD.Com Inc (JD)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards JD.Com Inc (NASDAQ:JD).

JD.Com Inc (NASDAQ:JD) was in 89 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 90. JD shareholders have witnessed an increase in hedge fund interest lately. There were 85 hedge funds in our database with JD positions at the end of the third quarter. Our calculations also showed that JD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s go over the fresh hedge fund action encompassing JD.Com Inc (NASDAQ:JD).

Do Hedge Funds Think JD Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 89 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JD over the last 22 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in JD.Com Inc (NASDAQ:JD) was held by Tiger Global Management LLC, which reported holding $4540.1 million worth of stock at the end of December. It was followed by D1 Capital Partners with a $1804.6 million position. Other investors bullish on the company included Hillhouse Capital Management, GQG Partners, and Fisher Asset Management. In terms of the portfolio weights assigned to each position Infini Capital allocated the biggest weight to JD.Com Inc (NASDAQ:JD), around 50.86% of its 13F portfolio. Kontiki Capital is also relatively very bullish on the stock, earmarking 35.16 percent of its 13F equity portfolio to JD.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Tairen Capital, managed by Larry Chen and Terry Zhang, initiated the most valuable position in JD.Com Inc (NASDAQ:JD). Tairen Capital had $178.8 million invested in the company at the end of the quarter. Daniel S. Och’s OZ Management also made a $72.8 million investment in the stock during the quarter. The other funds with brand new JD positions are Tony Chin’s Infini Capital, Chris Rokos’s Rokos Capital Management, and Jonathan Soros’s JS Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as JD.Com Inc (NASDAQ:JD) but similarly valued. These stocks are Royal Dutch Shell plc (NYSE:RDS), Amgen, Inc. (NASDAQ:AMGN), BHP Group (NYSE:BBL), HDFC Bank Limited (NYSE:HDB), Charter Communications, Inc. (NASDAQ:CHTR), AstraZeneca plc (NYSE:AZN), and Philip Morris International Inc. (NYSE:PM). All of these stocks’ market caps resemble JD’s market cap.

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As you can see these stocks had an average of 45 hedge funds with bullish positions and the average amount invested in these stocks was $3448 million. That figure was $14396 million in JD’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand BHP Group (NYSE:BBL) is the least popular one with only 18 bullish hedge fund positions. JD.Com Inc (NASDAQ:JD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JD is 88. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately JD wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on JD were disappointed as the stock returned -12.5% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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