The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded NIO Inc. (NYSE:NIO) and determine whether the smart money was really smart about this stock.
NIO Inc. (NYSE:NIO) investors should pay attention to an increase in hedge fund interest in recent months. NIO Inc. (NYSE:NIO) was in 30 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 16 hedge funds in our database with NIO holdings at the end of March. Our calculations also showed that NIO isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
MILLENNIUM MANAGEMENT
Israel Englander of Millennium Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we're going to go over the key hedge fund action surrounding NIO Inc. (NYSE:NIO).
What does smart money think about NIO Inc. (NYSE:NIO)?
At the end of the second quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 88% from the first quarter of 2020. By comparison, 14 hedge funds held shares or bullish call options in NIO a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, D E Shaw held the most valuable stake in NIO Inc. (NYSE:NIO), which was worth $146.9 million at the end of the third quarter. On the second spot was Jericho Capital Asset Management which amassed $90.5 million worth of shares. Renaissance Technologies, Electron Capital Partners, and Millennium 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 Electron Capital Partners allocated the biggest weight to NIO Inc. (NYSE:NIO), around 7.65% of its 13F portfolio. Jericho Capital Asset Management is also relatively very bullish on the stock, setting aside 3.54 percent of its 13F equity portfolio to NIO.
As one would reasonably expect, some big names have jumped into NIO Inc. (NYSE:NIO) headfirst. Jericho Capital Asset Management, managed by Josh Resnick, assembled the biggest position in NIO Inc. (NYSE:NIO). Jericho Capital Asset Management had $90.5 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $71.8 million position during the quarter. The other funds with brand new NIO positions are Jos Shaver's Electron Capital Partners, Simon Sadler's Segantii Capital, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.
Let's now review hedge fund activity in other stocks similar to NIO Inc. (NYSE:NIO). These stocks are Dr. Reddy's Laboratories Limited (NYSE:RDY), 10x Genomics, Inc. (NASDAQ:TXG), Crown Holdings, Inc. (NYSE:CCK), Fastly, Inc. (NYSE:FSLY), Cna Financial Corporation (NYSE:CNA), NiSource Inc. (NYSE:NI), and Equitable Holdings, Inc. (NYSE:EQH). This group of stocks' market values are similar to NIO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RDY,12,173335,1 TXG,19,313211,-1 CCK,51,1239713,-5 FSLY,27,1662391,5 CNA,12,48476,0 NI,21,300585,-6 EQH,39,1111581,12 Average,25.9,692756,0.9 [/table]
As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $693 million. That figure was $568 million in NIO's case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Dr. Reddy's Laboratories Limited (NYSE:RDY) is the least popular one with only 12 bullish hedge fund positions. NIO Inc. (NYSE:NIO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NIO is 63.1. 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. 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on NIO as the stock returned 142.6% during Q3 (through September 14th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
