Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Kaixin Auto Holdings (NASDAQ:KXIN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is KXIN a good stock to buy? Kaixin Auto Holdings (NASDAQ:KXIN) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of March. Our calculations also showed that KXIN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare KXIN to other stocks including First Business Financial Services Inc (NASDAQ:FBIZ), Monroe Capital Corp (NASDAQ:MRCC), and Matinas Biopharma Holdings, Inc. (NYSE:MTNB) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman Paloma Partners
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Now we're going to view the key hedge fund action regarding Kaixin Auto Holdings (NASDAQ:KXIN).
Do Hedge Funds Think KXIN Is A Good Stock To Buy Now?
At Q1's end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 1 hedge funds with a bullish position in KXIN a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Is KXIN A Good Stock To Buy?
The largest stake in Kaixin Auto Holdings (NASDAQ:KXIN) was held by Paloma Partners, which reported holding $0.1 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $0.1 million position. Other investors bullish on the company included Engineers Gate Manager, Schonfeld Strategic Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Engineers Gate Manager allocated the biggest weight to Kaixin Auto Holdings (NASDAQ:KXIN), around 0.01% of its 13F portfolio. Paloma Partners is also relatively very bullish on the stock, designating 0.0031 percent of its 13F equity portfolio to KXIN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 683 Capital Partners. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Engineers Gate Manager).
Let's go over hedge fund activity in other stocks similar to Kaixin Auto Holdings (NASDAQ:KXIN). We will take a look at First Business Financial Services Inc (NASDAQ:FBIZ), Monroe Capital Corp (NASDAQ:MRCC), Matinas Biopharma Holdings, Inc. (NYSE:MTNB), Orion Energy Systems, Inc. (NYSE:OESX), Renren Inc (NYSE:RENN), Information Services Group, Inc. (NASDAQ:III), and ADMA Biologics Inc (NASDAQ:ADMA). This group of stocks' market values resemble KXIN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FBIZ,3,6057,1 MRCC,3,2470,-2 MTNB,8,1763,-1 OESX,10,17546,1 RENN,3,1091,2 III,7,38598,0 ADMA,9,34064,-5 Average,6.1,14513,-0.6 [/table]
As you can see these stocks had an average of 6.1 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $0 million in KXIN's case. Orion Energy Systems, Inc. (NYSE:OESX) is the most popular stock in this table. On the other hand First Business Financial Services Inc (NASDAQ:FBIZ) is the least popular one with only 3 bullish hedge fund positions. Kaixin Auto Holdings (NASDAQ:KXIN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KXIN is 36. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and surpassed the market again by 6.1 percentage points. Unfortunately KXIN wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); KXIN investors were disappointed as the stock returned -34.2% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
