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Hedge Funds Were Selling HUYA Inc. (HUYA) Before The Coronavirus

Abigail Fisher

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. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of HUYA Inc. (NYSE:HUYA).

HUYA Inc. (NYSE:HUYA) was in 21 hedge funds' portfolios at the end of the fourth quarter of 2019. HUYA shareholders have witnessed a decrease in hedge fund sentiment recently. There were 22 hedge funds in our database with HUYA holdings at the end of the previous quarter. Our calculations also showed that HUYA 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).

In today’s marketplace there are several indicators investors have at their disposal to evaluate their holdings. A couple of the most useful indicators are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the top investment managers can beat the market by a significant amount (see the details here).

[caption id="attachment_690797" align="aligncenter" width="399"] Sahm Adrangi of Kerrisdale Capital[/caption]

Sahm Adrangi Kerrisdale Capital

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind we're going to take a glance at the new hedge fund action encompassing HUYA Inc. (NYSE:HUYA).

What does smart money think about HUYA Inc. (NYSE:HUYA)?

At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in HUYA a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Renaissance Technologies, holds the largest position in HUYA Inc. (NYSE:HUYA). Renaissance Technologies has a $92.8 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Daniel Patrick Gibson of Sylebra Capital Management, with a $45.6 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism consist of Sahm Adrangi's Kerrisdale Capital, D. E. Shaw's D E Shaw and David Kowitz and Sheldon Kasowitz's Indus Capital. In terms of the portfolio weights assigned to each position Kerrisdale Capital allocated the biggest weight to HUYA Inc. (NYSE:HUYA), around 13.92% of its 13F portfolio. Kadensa Capital is also relatively very bullish on the stock, designating 11.45 percent of its 13F equity portfolio to HUYA.

Because HUYA Inc. (NYSE:HUYA) has faced bearish sentiment from hedge fund managers, it's easy to see that there was a specific group of hedgies that slashed their entire stakes by the end of the third quarter. Interestingly, Richard Driehaus's Driehaus Capital said goodbye to the biggest position of the 750 funds followed by Insider Monkey, totaling about $14.9 million in stock, and Philippe Laffont's Coatue Management was right behind this move, as the fund dumped about $6.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as HUYA Inc. (NYSE:HUYA) but similarly valued. We will take a look at United Bankshares, Inc. (NASDAQ:UBSI), Bank OZK (NASDAQ:OZK), Blackbaud, Inc. (NASDAQ:BLKB), and IBERIABANK Corporation (NASDAQ:IBKC). This group of stocks' market values are closest to HUYA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBSI,18,51802,7 OZK,25,276283,4 BLKB,16,102843,2 IBKC,32,234876,10 Average,22.75,166451,5.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $305 million in HUYA's case. IBERIABANK Corporation (NASDAQ:IBKC) is the most popular stock in this table. On the other hand Blackbaud, Inc. (NASDAQ:BLKB) is the least popular one with only 16 bullish hedge fund positions. HUYA Inc. (NYSE:HUYA) 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 HUYA as the stock returned -16.5% 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.

5 Most Popular Stocks Among Hedge Funds

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

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