Is FinVolution Group (FINV) A Good Stock To Buy?

Asma UL Husna

In this article you are going to find out whether hedge funds think FinVolution Group (NYSE:FINV) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is FinVolution Group (NYSE:FINV) a good stock to buy? Prominent investors were getting less optimistic. The number of bullish hedge fund bets went down by 4 lately. FinVolution Group (NYSE:FINV) was in 5 hedge funds' portfolios at the end of September. The all time high for this statistics is 12. Our calculations also showed that FINV 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). There were 9 hedge funds in our database with FINV holdings at the end of June. Video: Watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are seen as worthless, old financial tools of years past. While there are more than 8000 funds with their doors open today, Our experts choose to focus on the aristocrats of this group, around 850 funds. These hedge fund managers have their hands on the lion's share of all hedge funds' total asset base, and by keeping an eye on their highest performing stock picks, Insider Monkey has identified numerous investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Donald Sussman Paloma Partners
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, 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. Keeping this in mind let's analyze the new hedge fund action regarding FinVolution Group (NYSE:FINV).

What have hedge funds been doing with FinVolution Group (NYSE:FINV)?

At third quarter's end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -44% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in FINV a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in FinVolution Group (NYSE:FINV) was held by Renaissance Technologies, which reported holding $1.7 million worth of stock at the end of September. It was followed by Oasis Management with a $0.2 million position. Other investors bullish on the company included Millennium Management, Paloma Partners, and Engineers Gate Manager. In terms of the portfolio weights assigned to each position Oasis Management allocated the biggest weight to FinVolution Group (NYSE:FINV), around 0.08% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0017 percent of its 13F equity portfolio to FINV.

Judging by the fact that FinVolution Group (NYSE:FINV) has faced falling interest from the aggregate hedge fund industry, it's easy to see that there was a specific group of money managers that decided to sell off their full holdings heading into Q4. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP sold off the largest stake of the "upper crust" of funds tracked by Insider Monkey, totaling about $0.2 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund cut about $0.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds heading into Q4.

Let's now take a look at hedge fund activity in other stocks similar to FinVolution Group (NYSE:FINV). We will take a look at Ribbon Communications Inc. (NASDAQ:RBBN), Universal Logistics Holdings, Inc. (NASDAQ:ULH), iHeartMedia, Inc. (NASDAQ:IHRT), UMH Properties, Inc (NYSE:UMH), ConnectOne Bancorp Inc (NASDAQ:CNOB), Trueblue Inc (NYSE:TBI), and National Energy Services Reunited Corp. (NASDAQ:NESR). This group of stocks' market caps resemble FINV's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RBBN,9,20789,0 ULH,10,19878,1 IHRT,21,117374,-3 UMH,8,7977,2 CNOB,9,19690,-2 TBI,15,46144,1 NESR,8,26931,0 Average,11.4,36969,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.4 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $2 million in FINV's case. iHeartMedia, Inc. (NASDAQ:IHRT) is the most popular stock in this table. On the other hand UMH Properties, Inc (NYSE:UMH) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks FinVolution Group (NYSE:FINV) is even less popular than UMH. Our overall hedge fund sentiment score for FINV is 13.5. 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. Hedge funds clearly dropped the ball on FINV as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 FINV as the stock returned 21.2% since Q3 (through November 27th) 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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