Should I Buy Uxin Limited (UXIN)?

Abigail Fisher
·6 min read

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Uxin Limited (NASDAQ:UXIN)? The smart money sentiment can provide an answer to this question.

Uxin Limited (NASDAQ:UXIN) has seen an increase in hedge fund interest lately. Uxin Limited (NASDAQ:UXIN) was in 5 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 12. There were 2 hedge funds in our database with UXIN holdings at the end of June. Our calculations also showed that UXIN isn't among the 30 most popular stocks among hedge funds (click for Q3 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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Michael Gelband of ExodusPoint Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Now we're going to take a gander at the key hedge fund action regarding Uxin Limited (NASDAQ:UXIN).

What does smart money think about Uxin Limited (NASDAQ:UXIN)?

Heading into the fourth quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 150% from the second quarter of 2020. On the other hand, there were a total of 4 hedge funds with a bullish position in UXIN a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

The largest stake in Uxin Limited (NASDAQ:UXIN) was held by Hillhouse Capital Management, which reported holding $2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $0.6 million position. Other investors bullish on the company included Arrowstreet Capital, Two Sigma Advisors, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Hillhouse Capital Management allocated the biggest weight to Uxin Limited (NASDAQ:UXIN), around 0.02% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, dishing out 0.0006 percent of its 13F equity portfolio to UXIN.

As industrywide interest jumped, key hedge funds have jumped into Uxin Limited (NASDAQ:UXIN) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Uxin Limited (NASDAQ:UXIN). Arrowstreet Capital had $0.1 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $0 million position during the quarter. The only other fund with a new position in the stock is Michael Gelband's ExodusPoint Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Uxin Limited (NASDAQ:UXIN) but similarly valued. These stocks are Tellurian Inc. (NASDAQ:TELL), International Tower Hill Mines Ltd (NYSE:THM), Applied Optoelectronics Inc (NASDAQ:AAOI), Graybug Vision, Inc. (NASDAQ:GRAY), Sierra Bancorp (NASDAQ:BSRR), W&T Offshore, Inc. (NYSE:WTI), and MOGU Inc. (NYSE:MOGU). This group of stocks' market valuations are similar to UXIN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TELL,3,2596,-1 THM,5,171654,1 AAOI,9,12567,-3 GRAY,10,136937,10 BSRR,9,9163,0 WTI,8,12428,-7 MOGU,6,29948,4 Average,7.1,53613,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.1 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $3 million in UXIN's case. Graybug Vision, Inc. (NASDAQ:GRAY) is the most popular stock in this table. On the other hand Tellurian Inc. (NASDAQ:TELL) is the least popular one with only 3 bullish hedge fund positions. Uxin Limited (NASDAQ:UXIN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UXIN is 34.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on UXIN as the stock returned 81.6% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.

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

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