Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Yelp Inc (NYSE:YELP) to find out whether it was one of their high conviction long-term ideas.
Is Yelp Inc (NYSE:YELP) an attractive stock to buy now? The best stock pickers are getting more bullish. The number of long hedge fund bets inched up by 9 in recent months. Our calculations also showed that yelp isn't among the 30 most popular stocks among hedge funds. YELP was in 33 hedge funds' portfolios at the end of the first quarter of 2019. There were 24 hedge funds in our database with YELP positions at the end of the previous quarter.
In the eyes of most traders, hedge funds are perceived as slow, outdated financial tools of yesteryear. While there are over 8000 funds with their doors open at present, We look at the upper echelon of this club, around 750 funds. Most estimates calculate that this group of people watch over the majority of all hedge funds' total capital, and by monitoring their highest performing stock picks, Insider Monkey has found a number of investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Let's review the key hedge fund action surrounding Yelp Inc (NYSE:YELP).
How have hedgies been trading Yelp Inc (NYSE:YELP)?
At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards YELP over the last 15 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Yelp Inc (NYSE:YELP) was held by Fisher Asset Management, which reported holding $110.2 million worth of stock at the end of March. It was followed by SQN Investors with a $101.8 million position. Other investors bullish on the company included D E Shaw, SoMa Equity Partners, and Millennium Management.
As aggregate interest increased, key hedge funds were leading the bulls' herd. EastBay Asset Management, managed by Adam Wolfberg and Steven Landry, established the most valuable call position in Yelp Inc (NYSE:YELP). EastBay Asset Management had $19 million invested in the company at the end of the quarter. Greg Poole's Echo Street Capital Management also initiated a $15.5 million position during the quarter. The other funds with brand new YELP positions are Ken Griffin's Citadel Investment Group, Andrew Feldstein and Stephen Siderow's Blue Mountain Capital, and Dmitry Balyasny's Balyasny Asset Management.
Let's now take a look at hedge fund activity in other stocks similar to Yelp Inc (NYSE:YELP). These stocks are Navient Corp (NASDAQ:NAVI), Guangshen Railway Co. Ltd (NYSE:GSH), Viavi Solutions Inc (NASDAQ:VIAV), and B2Gold Corp (NYSE:BTG). All of these stocks' market caps are closest to YELP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NAVI,31,470784,2 GSH,1,4185,0 VIAV,28,239221,2 BTG,16,122491,-1 Average,19,209170,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $568 million in YELP's case. Navient Corp (NASDAQ:NAVI) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Yelp Inc (NYSE:YELP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately YELP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on YELP were disappointed as the stock returned -9.5% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.