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We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors 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 towards YY Inc (NASDAQ:YY).
Is YY Inc (NASDAQ:YY) the right pick for your portfolio? Hedge funds are betting on the stock. The number of bullish hedge fund bets went up by 6 lately. Our calculations also showed that YY isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most market participants, hedge funds are perceived as unimportant, outdated investment vehicles of yesteryear. While there are greater than 8000 funds in operation today, Our researchers choose to focus on the top tier of this club, about 850 funds. These hedge fund managers administer most of all hedge funds' total asset base, and by paying attention to their finest stock picks, Insider Monkey has spotted many investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's take a look at the key hedge fund action surrounding YY Inc (NASDAQ:YY).
What have hedge funds been doing with YY Inc (NASDAQ:YY)?
At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 35% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in YY over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in YY Inc (NASDAQ:YY) was held by Sylebra Capital Management, which reported holding $50.8 million worth of stock at the end of September. It was followed by Alkeon Capital Management with a $23.6 million position. Other investors bullish on the company included Discovery Capital Management, Tiger Pacific Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Meru Capital allocated the biggest weight to YY Inc (NASDAQ:YY), around 30.63% of its 13F portfolio. Discovery Capital Management is also relatively very bullish on the stock, designating 5.47 percent of its 13F equity portfolio to YY.
As industrywide interest jumped, specific money managers were leading the bulls' herd. Sylebra Capital Management, managed by Daniel Patrick Gibson, established the biggest position in YY Inc (NASDAQ:YY). Sylebra Capital Management had $50.8 million invested in the company at the end of the quarter. Panayotis Takis Sparaggis's Alkeon Capital Management also made a $23.6 million investment in the stock during the quarter. The following funds were also among the new YY investors: Rob Citrone's Discovery Capital Management, Run Ye, Junji Takegami and Hoyon Hwang's Tiger Pacific Capital, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as YY Inc (NASDAQ:YY) but similarly valued. These stocks are Angie's List Inc (NASDAQ:ANGI), Sterling Bancorp (NYSE:STL), Spire Inc. (NYSE:SR), and The Timken Company (NYSE:TKR). This group of stocks' market caps resemble YY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ANGI,23,386770,0 STL,30,337941,5 SR,12,55236,-2 TKR,40,407847,11 Average,26.25,296949,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $143 million in YY's case. The Timken Company (NYSE:TKR) is the most popular stock in this table. On the other hand Spire Inc. (NYSE:SR) is the least popular one with only 12 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on YY as the stock returned 2.9% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.