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Were Hedge Funds Right About Bilibili Inc. (BILI)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Bilibili Inc. (NASDAQ:BILI) and determine whether hedge funds had an edge regarding this stock.

Is Bilibili Inc. (NASDAQ:BILI) a buy right now? The smart money was getting more optimistic. The number of long hedge fund bets rose by 1 in recent months. Our calculations also showed that BILI 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 dozens of tools stock traders have at their disposal to appraise publicly traded companies. A duo of the less utilized tools are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite investment managers can trounce the market by a solid amount (see the details here).

Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now let’s analyze the recent hedge fund action encompassing Bilibili Inc. (NASDAQ:BILI).

What have hedge funds been doing with Bilibili Inc. (NASDAQ:BILI)?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BILI over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Among these funds, Hillhouse Capital Management held the most valuable stake in Bilibili Inc. (NASDAQ:BILI), which was worth $239.2 million at the end of the third quarter. On the second spot was Yiheng Capital which amassed $189.8 million worth of shares. Renaissance Technologies, Alkeon Capital Management, and Keywise Capital 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 Yiheng Capital allocated the biggest weight to Bilibili Inc. (NASDAQ:BILI), around 14.93% of its 13F portfolio. Keywise Capital Management is also relatively very bullish on the stock, earmarking 9.1 percent of its 13F equity portfolio to BILI.

As industrywide interest jumped, some big names were breaking ground themselves. Jericho Capital Asset Management, managed by Josh Resnick, created the most outsized position in Bilibili Inc. (NASDAQ:BILI). Jericho Capital Asset Management had $26.9 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $13.9 million position during the quarter. The following funds were also among the new BILI investors: Phil Frohlich’s Prescott Group Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Greg Eisner’s Engineers Gate Manager.

Let’s check out hedge fund activity in other stocks similar to Bilibili Inc. (NASDAQ:BILI). These stocks are United Rentals, Inc. (NYSE:URI), Sarepta Therapeutics Inc (NASDAQ:SRPT), Brookfield Renewable Partners L.P. (NYSE:BEP), and E*TRADE Financial Corporation (NASDAQ:ETFC). This group of stocks’ market caps are closest to BILI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
URI 43 752405 -11
SRPT 33 905750 -9
BEP 3 18840 -1
ETFC 37 941990 -11
Average 29 654746 -8

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $655 million. That figure was $731 million in BILI’s case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand Brookfield Renewable Partners L.P. (NYSE:BEP) is the least popular one with only 3 bullish hedge fund positions. Bilibili Inc. (NASDAQ:BILI) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on BILI as the stock returned 97.8% during the second quarter and outperformed the market by an even larger margin.

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