Were Hedge Funds Right About JD.Com Inc (JD)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards JD.Com Inc (NASDAQ:JD).

Is JD.Com Inc (NASDAQ:JD) a buy here? The smart money is becoming more confident. The number of long hedge fund bets inched up by 3 in recent months. Our calculations also showed that JD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). JD was in 63 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 60 hedge funds in our database with JD holdings at the end of the previous quarter.

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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. Federal Reserve and Central Banks all around world are printing money like there is no tomorrow, so we check out this this precious metals expert’s stock pick. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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. Now let’s review the new hedge fund action regarding JD.Com Inc (NASDAQ:JD).

Hedge fund activity in JD.Com Inc (NASDAQ:JD)

At Q4’s end, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JD over the last 18 quarters. 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 Insider Monkey’s hedge fund database, Tiger Global Management LLC, managed by Chase Coleman, holds the number one position in JD.Com Inc (NASDAQ:JD). Tiger Global Management LLC has a $1.8619 billion position in the stock, comprising 10.3% of its 13F portfolio. Sitting at the No. 2 spot is Andreas Halvorsen of Viking Global, with a $783 million position; the fund has 3.7% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions consist of Daniel Sundheim’s D1 Capital Partners, Lei Zhang’s Hillhouse Capital Management and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position Kontiki Capital allocated the biggest weight to JD.Com Inc (NASDAQ:JD), around 29.16% of its 13F portfolio. Tiger Global Management LLC is also relatively very bullish on the stock, earmarking 10.27 percent of its 13F equity portfolio to JD.

Consequently, key hedge funds were leading the bulls’ herd. Maplelane Capital, managed by Leon Shaulov, created the most valuable position in JD.Com Inc (NASDAQ:JD). Maplelane Capital had $41.5 million invested in the company at the end of the quarter. Run Ye, Junji Takegami and Hoyon Hwang’s Tiger Pacific Capital also made a $32.5 million investment in the stock during the quarter. The following funds were also among the new JD investors: Kamyar Khajavi’s MIK Capital, Campbell Wilson’s Old Well Partners, and Joseph Samuels’s Islet Management.

Let’s go over hedge fund activity in other stocks similar to JD.Com Inc (NASDAQ:JD). These stocks are ABB Ltd (NYSE:ABB), General Dynamics Corporation (NYSE:GD), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), and Uber Technologies, Inc. (NYSE:UBER). This group of stocks’ market caps are similar to JD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ABB 10 372334 -3
GD 46 6699253 4
SMFG 11 584035 0
UBER 94 6677417 46
Average 40.25 3583260 11.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.25 hedge funds with bullish positions and the average amount invested in these stocks was $3583 million. That figure was $6041 million in JD’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 10 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 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 lost 1.0% in 2020 through April 20th but still beat the market by 11 percentage points. Hedge funds were also right about betting on JD as the stock returned 28.3% in 2020 (through April 20th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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