Top 3 Hedge Fund Heatmap Positions Sea Ltd, Carvana & Tandem
Sea Ltd. becoming Hedge Fund’s Favourite
The 800+ hedge funds and famous money managers tracked by Singular have already compiled and submitted their 13F filings for the latest quarter. We went through these filings and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment still gravitate towards Sea Limited (NYSE:SE).
Sea Limited ADR (SE) saw impressive growth over the past year, substantially outperforming the S&P 500 and rising on the our watchlist. Hedge funds and institutions are actively buying into the company. Sea’s stock rose by approximately 582.82% since the start of 2020, a whopping gain compared to the S&P’s increase of about 21.2%.
Sea is a consumer internet company that offers e-commerce and online gaming and personal computer content, mobile digital content, and digital financial services. The technology company is structured with three business segments to deliver these services: Garena, Shopee, and SeaMoney. While many businesses have faced hurdles during the coronavirus pandemic, Sea has seen a significant boost in sales as customers following stay-at-home advisories and quarantines seek greater online retail therapy and digital entertainment, with no clear end in sight to these behavioral shifts.
The rise of 5G technology in 2020 is expected to increase wireless network investment in infrastructure. It is predicted that 5G will enhance the performance by 100 times faster than 4G networks that will provide better user experience and drive the Southeast Asia Gaming market.
The Southeast Asia Gaming Market is expected to register a CAGR of 8.5% over the forecast period of 2020 to 2025 and Singular believes Sea is well positioned to capitalize on this rising eSports trend.
Singapore's Sea is one of the world's best performing stock and have increased more than 1,000 per cent since the beginning of 2018.
Why Hedge Funds Are Favoring Sea Ltd.
Sea has earned the favor of hedge fund managers and institutions. Looking at activity by the top hedge funds in the third quarter, the aggregate 13F shares held increased to about 72.5 million from 71.7 million, an increase of approximately 1.2%. Of the hedge funds, 33 created new positions, 48 added to an existing holding, 11 exited, and 67 reduced their stakes. Institutions were also buying, and aggregate holdings increased by about 0.9% to approximately 241.0 million from 238.8 million.
Analysts See Strong Growth
SE has received a consensus rating of Buy. The company's average rating score is 2.60, and is based on 7 buy ratings, 2 hold ratings, and 1 sell rating.
Investment and financial service companies recognize Sea’s growth potential and street analysts are bullish. Credit Suisse Group AG recently increased Sea’s price target to a Street high of $285, up from $225. Credit Suisse cited recent gaming growth and predictions for growth in Sea’s e-commerce unit, Shopee.
Positive Outlook
Hedge funds and institutions are buying, and analysts share optimism following a year of robust revenue growth. There is an opportunity for Sea to continue to reap the benefits of the pandemic’s influence on online shopping and entertainment habits. Recent growth and multi-year estimates are encouraging for investors in the long-term.
Encouraging Multi-year Estimates
Analysts expect to see earnings rise over the next several years, with increases in growth from 2020 through 2026 spanning from approximately 13.4% year over year to 56.4%. Estimated increases for earnings between 2020 and 2023 could bring year over year earnings to $2.77 per share in 2023, up from a loss of $2.47 for 2020.
Sea’s stock impressive 582.82% since the start of 2020, a whopping gain compared to the S&P’s increase of about 21.2%.
2. Carvana Massive Momentum Amidst Pandemic
Carvana Co. (CVNA) , one of Flagships holdings saw improved performance over the past ten months after a dip in February and March 2020 related to the coronavirus pandemic. Carvana outperformed the S&P 500, rising by approximately 221.6% compared to the S&P’s gain of about 21.8% since the end of 2019. This has helped to propel the stock up to number one on our watchlist based on 13F filings and hedge fund activity.
Carvana operates an online platform for buying used cars, serving customers throughout the United States. While car sales initially fell at the start of the pandemic as the country went into lockdown, the company has fortunately seen demand recover for its e-commerce style of automobile retail. Factors that may have contributed to Carvana’s strong growth are that many consumers want to spend more conservatively on automobiles when unemployment rates are high.
New car inventories are low due to pandemic-related business shutdowns. Carvana offers touchless delivery options that align well with social distancing practices. Buyers don’t need to visit a used car lot, and vehicles are delivered to their homes with friendly return policies. It has worked in Carvana’s favor that transportation trends have temporarily shifted away from public transit during the pandemic and made driving vehicles more appealing. Government stimulus checks have also likely made it easier for consumers to make down payments on cars.
Why Hedge Funds are Buying Carvana
Carvana is enjoying positive actions by hedge fund managers and institutions. Looking at activity by the top hedge funds in the fourth quarter, the aggregate 13F shares held increased to about 40.6 million from 40.4 million, an increase of approximately 0.6%.
Of the hedge funds, 40 created new positions, 33 added to existing holdings, 14 exited, and 41 reduced their stakes. With aggregate holdings increasing by about 4.5% to approximately 86.9 million from 83.2 million, institutions were also buying.
Based on Latest Hedge Funds 13F Filings
Analysts See Growth Potential
Wells Fargo & Co. expects considerable growth for Carvana given the recent online auto evolution, and analyst Zachery Fadem sees the company as a leader in growth with continued potential. CFRA Research Co.’s analyst, Garrett Nelson, recently shared mixed views on the used car retailer, noting they have increased competition and don’t include money-making service operations or part sales as part of their business model, yet have an improving gross margin influenced by pandemic trends. CFRA raised its rating on Carvana to Hold from Sell.
Positive Outlook
Overall, there is a positive outlook for Carvana’s financial future. The company’s impressive growth and future revenue estimates appeal to many investors. While Carvana will have to contend with increased competition from other used car companies, they have great potential for increased revenue. Their business model has aligned well to changing shopping trends and priorities during the pandemic, leaving investors with strong motivations to acquire shares.
Carvana outperformed the S&P 500, rising by approximately 221.6% compared to the S&P’s gain of about 21.8% since the end of 2019.
3. Hedge Funds Buying Tandem Again
Tandem Diabetes Care, Inc. (TNDM) has traversed a rocky path in 2020 and early 2021. The diabetes equipment supplier has seen both growth and setbacks along the way and yet managed to climb to the impressive ranking of number two on our watchlist. Over the last few months, Tandem regained momentum, outperforming the S&P 500. Since the beginning of 2020, the stock has risen by approximately 59.4% compared to the S&P’s gain of about 18.5%.
Tandem is a medical device company that develops insulin pumps, insulin dosing systems, glucose monitoring software, and other products and services that improve individuals’ lives with diabetes.
Tandem was affected by the coronavirus pandemic in the spring of 2020 and the stock had a pullback and quickly rebounded. Government stay-at-home advisories, business closures, and general pandemic-induced fear by the public likely contributed to a temporary reduction in the volume of visits to doctors and delays in bringing Tandem’s products and services to new customers.
Fortunately, about five months into the pandemic, the company’s business rebounded as medical visits started to return to normal levels and new customers began to try Tandem’s insulin pump therapy services.
Mixed Results from Hedge Funds and Institutions
Tandem seemed to fall out of favor with hedge funds. The fourth quarter aggregate 13F shares held decreased to about 14.9 million from 16.3 million, a decrease of approximately 8.6%. Of the hedge funds, 13 created new positions, 35 added to existing holdings, 21 exited, and 31 reduced their stakes. In contrast to hedge funds, institutions were buying. Overall, institutions increased their aggregate holdings by about 7.2%, to approximately 57.8 million from 54.0 million, helping to push Tandem on the HeatMap to 2 from 41.
Since the beginning of 2020, the stock has risen by approximately 59.4% compared to the S&P’s gain of about 18.5%.
Based on Latest 13F Filings
Optimistic Analysts
Lake Street Capital Market’s analyst, Brooks O’Neil, took note of Tandem’s strong fourth-quarter results and raised its price target to $150 from $137. O’Neil’s enthusiasm about the stock is influenced by a great short and long-term outlook for Tandem’s role in addressing the diabetes epidemic. Worldwide increases in insulin pump shipments have contributed to Tandem beating Wall Street estimates for its fourth-quarter revenue.
Favorable Outlook
Tandem showed resiliency during the coronavirus pandemic. Despite its competition in the diabetic device market, it continues to build its customer base and deliver products and services that aid in the diabetes pandemic.
Analysts are bullish about the future, raising price targets as customer demand for diabetic devices remains strong. Tandem has regained some upward traction in recent months and holds promise beyond 2021 for patient investors.