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Did Hedge Funds Drop The Ball On So-Young International Inc. (SY) ?

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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of So-Young International Inc. (NASDAQ:SY) based on that data.

Is So-Young International Inc. (NASDAQ:SY) a bargain? The smart money is in a pessimistic mood. The number of long hedge fund bets dropped by 3 in recent months. Our calculations also showed that SY isn't among the 30 most popular stocks among hedge funds (see the video below).

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

[caption id="attachment_681361" align="aligncenter" width="473"]

Glen Kacher of Light Street Capital
Glen Kacher of Light Street Capital

Glen Kacher of Light Street Capital[/caption]

Let's take a glance at the new hedge fund action surrounding So-Young International Inc. (NASDAQ:SY).

What does smart money think about So-Young International Inc. (NASDAQ:SY)?

Heading into the fourth quarter of 2019, a total of 2 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -60% from the second quarter of 2019. On the other hand, there were a total of 0 hedge funds with a bullish position in SY a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Of the funds tracked by Insider Monkey, Glen Kacher's Light Street Capital has the most valuable position in So-Young International Inc. (NASDAQ:SY), worth close to $30.6 million, accounting for 2.2% of its total 13F portfolio. On Light Street Capital's heels is QVT Financial, led by Daniel Gold, holding a $0.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Light Street Capital allocated the biggest weight to So-Young International Inc. (NASDAQ:SY), around 2.2% of its portfolio. QVT Financial is also relatively very bullish on the stock, designating 0.17 percent of its 13F equity portfolio to SY.

Due to the fact that So-Young International Inc. (NASDAQ:SY) has experienced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few funds that decided to sell off their entire stakes by the end of the third quarter. Interestingly, Israel Englander's Millennium Management said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, valued at close to $5.2 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also sold off its stock, about $1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let's now review hedge fund activity in other stocks similar to So-Young International Inc. (NASDAQ:SY). These stocks are Star Bulk Carriers Corp. (NASDAQ:SBLK), HudBay Minerals Inc (NYSE:HBM), QAD Inc. (NASDAQ:QADA), and Athenex, Inc. (NASDAQ:ATNX). All of these stocks' market caps are closest to SY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBLK,12,445578,1 HBM,13,136771,1 QADA,14,128085,3 ATNX,15,276846,5 Average,13.5,246820,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $31 million in SY's case. Athenex, Inc. (NASDAQ:ATNX) is the most popular stock in this table. On the other hand Star Bulk Carriers Corp. (NASDAQ:SBLK) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks So-Young International Inc. (NASDAQ:SY) is even less popular than SBLK. Hedge funds clearly dropped the ball on SY 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. A small number of hedge funds were also right about betting on SY as the stock returned 29% during the fourth quarter (through 11/22) and outperformed the market by an even larger margin.

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

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