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Were Hedge Funds Right About Piling Into Bitauto Hldg Ltd (BITA)?

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 Bitauto Hldg Ltd (NYSE:BITA) and determine whether hedge funds had an edge regarding this stock.

Is Bitauto Hldg Ltd (NYSE:BITA) a buy right now? Money managers were in an optimistic mood. The number of bullish hedge fund positions improved by 3 recently. Our calculations also showed that BITA 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). BITA was in 18 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with BITA positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most shareholders, hedge funds are seen as worthless, old investment tools of yesteryear. While there are over 8000 funds trading at present, Our experts hone in on the elite of this club, around 850 funds. These investment experts watch over most of all hedge funds’ total asset base, and by tracking their best equity investments, Insider Monkey has found various investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed 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 .

YORK CAPITAL MANAGEMENT

James Dinan of York Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to review the latest hedge fund action regarding Bitauto Hldg Ltd (NYSE:BITA).

What does smart money think about Bitauto Hldg Ltd (NYSE:BITA)?

Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the fourth quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in BITA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is BITA A Good Stock To Buy?

Among these funds, Maso Capital held the most valuable stake in Bitauto Hldg Ltd (NYSE:BITA), which was worth $42 million at the end of the third quarter. On the second spot was York Capital Management which amassed $15.4 million worth of shares. Millennium Management, Pentwater Capital Management, and Oasis 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 Maso Capital allocated the biggest weight to Bitauto Hldg Ltd (NYSE:BITA), around 10.87% of its 13F portfolio. Oasis Management is also relatively very bullish on the stock, designating 4.79 percent of its 13F equity portfolio to BITA.

As one would reasonably expect, specific money managers were breaking ground themselves. Renaissance Technologies, assembled the most outsized position in Bitauto Hldg Ltd (NYSE:BITA). Renaissance Technologies had $0.2 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Bitauto Hldg Ltd (NYSE:BITA) but similarly valued. We will take a look at Azure Power Global Limited (NYSE:AZRE), CNX Midstream Partners LP (NYSE:CNXM), Encore Capital Group, Inc. (NASDAQ:ECPG), and Neenah Inc. (NYSE:NP). This group of stocks’ market values are similar to BITA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AZRE 4 10039 0
CNXM 2 7681 -3
ECPG 15 37246 2
NP 13 22734 2
Average 8.5 19425 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $99 million in BITA’s case. Encore Capital Group, Inc. (NASDAQ:ECPG) is the most popular stock in this table. On the other hand CNX Midstream Partners LP (NYSE:CNXM) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Bitauto Hldg Ltd (NYSE:BITA) is more popular among hedge funds. 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 returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on BITA as the stock returned 52.5% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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