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Hedge Funds Are Selling DouYu International Holdings Limited (DOYU)

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With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was DouYu International Holdings Limited (NASDAQ:DOYU).

DouYu International Holdings Limited (NASDAQ:DOYU) was in 25 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 29. DOYU investors should pay attention to a decrease in enthusiasm from smart money of late. There were 29 hedge funds in our database with DOYU holdings at the end of March. Our calculations also showed that DOYU isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

William Gray Orbis Investment Management
William Gray Orbis Investment Management

William Gray of Orbis Investment Management

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. Now we're going to take a look at the new hedge fund action encompassing DouYu International Holdings Limited (NASDAQ:DOYU).

Do Hedge Funds Think DOYU Is A Good Stock To Buy Now?

At second quarter's end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in DOYU a year ago. 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, Infini Capital held the most valuable stake in DouYu International Holdings Limited (NASDAQ:DOYU), which was worth $57.5 million at the end of the second quarter. On the second spot was Schonfeld Strategic Advisors which amassed $28.1 million worth of shares. Laurion Capital Management, Orbis Investment Management, and Alpine Associates 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 Infini Capital allocated the biggest weight to DouYu International Holdings Limited (NASDAQ:DOYU), around 60.96% of its 13F portfolio. Panview Capital is also relatively very bullish on the stock, setting aside 4.71 percent of its 13F equity portfolio to DOYU.

Due to the fact that DouYu International Holdings Limited (NASDAQ:DOYU) has faced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of money managers that slashed their positions entirely by the end of the second quarter. Intriguingly, James Dinan's York Capital Management cut the biggest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $23.5 million in stock. Steven Clark's fund, Omni Partners, also cut its stock, about $6.3 million worth. These transactions are important to note, as total hedge fund interest fell by 4 funds by the end of the second quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as DouYu International Holdings Limited (NASDAQ:DOYU) but similarly valued. These stocks are LexinFintech Holdings Ltd. (NASDAQ:LX), WSFS Financial Corporation (NASDAQ:WSFS), Golden Ocean Group Ltd (NASDAQ:GOGL), TowneBank (NASDAQ:TOWN), Paramount Group Inc (NYSE:PGRE), Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS), and ALX Oncology Holdings Inc. (NASDAQ:ALXO). All of these stocks' market caps match DOYU's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LX,12,64778,1 WSFS,11,69307,1 GOGL,15,133392,4 TOWN,10,42337,1 PGRE,17,147529,0 VLRS,16,253576,2 ALXO,16,533205,5 Average,13.9,177732,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $178 million. That figure was $231 million in DOYU's case. Paramount Group Inc (NYSE:PGRE) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks DouYu International Holdings Limited (NASDAQ:DOYU) is more popular among hedge funds. Our overall hedge fund sentiment score for DOYU is 76.9. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Unfortunately DOYU wasn't nearly as popular as these 5 stocks and hedge funds that were betting on DOYU were disappointed as the stock returned -46.2% since the end of the second quarter (through 10/22) 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 since 2019.

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