Were Hedge Funds Right About 51job, Inc. (JOBS)?
Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards 51job, Inc. (NASDAQ:JOBS).
51job, Inc. (NASDAQ:JOBS) investors should pay attention to an increase in activity from the world's largest hedge funds lately. 51job, Inc. (NASDAQ:JOBS) was in 18 hedge funds' portfolios at the end of March. The all time high for this statistic was previously 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that JOBS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Noam Gottesman of GLG Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 let's take a glance at the new hedge fund action encompassing 51job, Inc. (NASDAQ:JOBS).
Do Hedge Funds Think JOBS Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in JOBS over the last 23 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in 51job, Inc. (NASDAQ:JOBS) was held by Pentwater Capital Management, which reported holding $44 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $22.5 million position. Other investors bullish on the company included GLG Partners, Segantii Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Infini Capital allocated the biggest weight to 51job, Inc. (NASDAQ:JOBS), around 4.31% of its 13F portfolio. Maso Capital is also relatively very bullish on the stock, earmarking 1.13 percent of its 13F equity portfolio to JOBS.
As one would reasonably expect, specific money managers have jumped into 51job, Inc. (NASDAQ:JOBS) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, established the most valuable position in 51job, Inc. (NASDAQ:JOBS). Two Sigma Advisors had $0.7 million invested in the company at the end of the quarter. Bruce Kovner's Caxton Associates LP also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Eisner's Engineers Gate Manager and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as 51job, Inc. (NASDAQ:JOBS) but similarly valued. We will take a look at UniFirst Corp (NYSE:UNF), PNM Resources, Inc. (NYSE:PNM), Axis Capital Holdings Limited (NYSE:AXS), Black Hills Corporation (NYSE:BKH), WD-40 Company (NASDAQ:WDFC), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), and Yamana Gold Inc. (NYSE:AUY). This group of stocks' market valuations resemble JOBS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNF,17,53080,2 PNM,26,720736,-4 AXS,23,596246,2 BKH,18,89974,-1 WDFC,14,176222,-1 ARNA,33,822587,-6 AUY,21,157547,1 Average,21.7,373770,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $374 million. That figure was $127 million in JOBS's case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand WD-40 Company (NASDAQ:WDFC) is the least popular one with only 14 bullish hedge fund positions. 51job, Inc. (NASDAQ:JOBS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JOBS is 47.5. 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 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 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. A small number of hedge funds were also right about betting on JOBS as the stock returned 24.3% since the end of the first quarter (through 7/23) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
