After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of June 28. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards YY Inc (NASDAQ:YY).
YY Inc (NASDAQ:YY) has seen an increase in activity from the world's largest hedge funds recently. YY was in 22 hedge funds' portfolios at the end of June. There were 20 hedge funds in our database with YY positions at the end of the previous quarter. Our calculations also showed that YY isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's review the new hedge fund action surrounding YY Inc (NASDAQ:YY).
Hedge fund activity in YY Inc (NASDAQ:YY)
Heading into the third quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the first quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in YY a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in YY Inc (NASDAQ:YY) was held by Alkeon Capital Management, which reported holding $69.7 million worth of stock at the end of March. It was followed by Jericho Capital Asset Management with a $59.5 million position. Other investors bullish on the company included Renaissance Technologies, Sylebra Capital Management, and Discovery Capital Management.
As one would reasonably expect, some big names have been driving this bullishness. Jericho Capital Asset Management, managed by Josh Resnick, created the most outsized position in YY Inc (NASDAQ:YY). Jericho Capital Asset Management had $59.5 million invested in the company at the end of the quarter. Rob Citrone's Discovery Capital Management also initiated a $19.2 million position during the quarter. The other funds with brand new YY positions are Run Ye, Junji Takegami and Hoyon Hwang's Tiger Pacific Capital, Jeffrey Talpins's Element Capital Management, and Eduardo Costa's Calixto Global Investors.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as YY Inc (NASDAQ:YY) but similarly valued. These stocks are Pegasystems Inc. (NASDAQ:PEGA), ITT Inc. (NYSE:ITT), Casey's General Stores, Inc. (NASDAQ:CASY), and SolarWinds Corporation (NYSE:SWI). This group of stocks' market valuations resemble YY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PEGA,24,627942,-1 ITT,25,595139,3 CASY,18,103589,0 SWI,22,2526424,7 Average,22.25,963274,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $963 million. That figure was $283 million in YY's case. ITT Inc. (NYSE:ITT) is the most popular stock in this table. On the other hand Casey's General Stores, Inc. (NASDAQ:CASY) is the least popular one with only 18 bullish hedge fund positions. YY Inc (NASDAQ:YY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately YY wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); YY investors were disappointed as the stock returned -19.3% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.