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Were Hedge Funds Right About Flocking Into Noah Holdings Limited (NOAH)?

Insider Monkey finished processing more than 700 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2018. In this article we are going to take a look at smart money sentiment towards Noah Holdings Limited (NYSE:NOAH).

Noah Holdings Limited (NYSE:NOAH) has experienced an increase in hedge fund sentiment of late. Our calculations also showed that NOAH isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Gifford Combs - Dalton Investments

Let’s take a gander at the key hedge fund action regarding Noah Holdings Limited (NYSE:NOAH).

Hedge fund activity in Noah Holdings Limited (NYSE:NOAH)

Heading into the first quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in NOAH a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

NOAH_apr2019

More specifically, Yiheng Capital was the largest shareholder of Noah Holdings Limited (NYSE:NOAH), with a stake worth $110.8 million reported as of the end of September. Trailing Yiheng Capital was Tiger Pacific Capital, which amassed a stake valued at $65.6 million. Driehaus Capital, Arrowstreet Capital, and Clough Capital Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names have jumped into Noah Holdings Limited (NYSE:NOAH) headfirst. Yiheng Capital, managed by Jonathan Guo, created the most valuable position in Noah Holdings Limited (NYSE:NOAH). Yiheng Capital had $110.8 million invested in the company at the end of the quarter. Charles Clough’s Clough Capital Partners also initiated a $7.6 million position during the quarter. The following funds were also among the new NOAH investors: Gifford Combs’s Dalton Investments and Steve Cohen’s Point72 Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Noah Holdings Limited (NYSE:NOAH) but similarly valued. We will take a look at Triton International Limited (NYSE:TRTN), MakeMyTrip Limited (NASDAQ:MMYT), Murphy USA Inc. (NYSE:MUSA), and Integer Holdings Corporation (NYSE:ITGR). This group of stocks’ market valuations resemble NOAH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRTN 11 25071 -1
MMYT 11 48024 -1
MUSA 24 150043 5
ITGR 19 219474 2
Average 16.25 110653 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $224 million in NOAH’s case. Murphy USA Inc. (NYSE:MUSA) is the most popular stock in this table. On the other hand Triton International Limited (NYSE:TRTN) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Noah Holdings Limited (NYSE:NOAH) is even less popular than TRTN. Hedge funds clearly dropped the ball on NOAH as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on NOAH as the stock returned 27.3% and outperformed the market by an even larger margin.

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

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