Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Coupang, Inc. (NYSE:CPNG).
Is Coupang, Inc. (NYSE:CPNG) a buy here? Investors who are in the know were getting less optimistic. The number of bullish hedge fund positions were trimmed by 7 lately. Coupang, Inc. (NYSE:CPNG) was in 33 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 40. Our calculations also showed that CPNG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 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.
Lee Ainslie of Maverick Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. With all of this in mind we're going to take a glance at the new hedge fund action surrounding Coupang, Inc. (NYSE:CPNG).
Do Hedge Funds Think CPNG Is A Good Stock To Buy Now?
At second quarter's end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CPNG over the last 24 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Greenoaks Capital held the most valuable stake in Coupang, Inc. (NYSE:CPNG), which was worth $11747.3 million at the end of the second quarter. On the second spot was Maverick Capital which amassed $4509.3 million worth of shares. SCGE Management, Foxhaven Asset Management, and Bill & Melinda Gates Foundation Trust 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 Greenoaks Capital allocated the biggest weight to Coupang, Inc. (NYSE:CPNG), around 88.42% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, setting aside 42.35 percent of its 13F equity portfolio to CPNG.
Because Coupang, Inc. (NYSE:CPNG) has faced bearish sentiment from the smart money, it's easy to see that there were a few money managers who were dropping their entire stakes by the end of the second quarter. At the top of the heap, Jacob Rothschild's RIT Capital Partners dumped the biggest stake of all the hedgies followed by Insider Monkey, comprising about $620.5 million in stock, and Sharlyn C. Heslam's Stockbridge Partners was right behind this move, as the fund dropped about $42.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 7 funds by the end of the second quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Coupang, Inc. (NYSE:CPNG) but similarly valued. We will take a look at Equinix, Inc. (REIT) (NASDAQ:EQIX), Snowflake Inc (NYSE:SNOW), Marsh & McLennan Companies, Inc. (NYSE:MMC), Chubb Limited (NYSE:CB), Baidu, Inc. (NASDAQ:BIDU), Westpac Banking Corporation (NYSE:WBK), and Fiserv, Inc. (NASDAQ:FISV). This group of stocks' market values match CPNG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EQIX,33,1266516,-8 SNOW,70,12507692,-1 MMC,41,2537494,4 CB,42,1737776,1 BIDU,59,3474215,-30 WBK,4,38055,1 FISV,72,2655395,-3 Average,45.9,3459592,-5.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.9 hedge funds with bullish positions and the average amount invested in these stocks was $3460 million. That figure was $18043 million in CPNG's case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. Coupang, Inc. (NYSE:CPNG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CPNG is 44.1. 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. 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 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately CPNG wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CPNG investors were disappointed as the stock returned -34% since the end of June (through 10/15) 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.