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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to HUYA Inc. (NYSE:HUYA) changed recently.
Is HUYA a good stock to buy now? HUYA Inc. (NYSE:HUYA) was in 22 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. HUYA shareholders have witnessed an increase in hedge fund sentiment recently. There were 21 hedge funds in our database with HUYA positions at the end of the second quarter. Our calculations also showed that HUYA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let's check out the key hedge fund action surrounding HUYA Inc. (NYSE:HUYA).
Do Hedge Funds Think HUYA Is A Good Stock To Buy Now?
At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the second quarter of 2020. By comparison, 22 hedge funds held shares or bullish call options in HUYA a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Composite Capital was the largest shareholder of HUYA Inc. (NYSE:HUYA), with a stake worth $130.5 million reported as of the end of September. Trailing Composite Capital was Renaissance Technologies, which amassed a stake valued at $116 million. Thunderbird Partners, Kerrisdale Capital, and Indus Capital 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 Composite Capital allocated the biggest weight to HUYA Inc. (NYSE:HUYA), around 30.05% of its 13F portfolio. Thunderbird Partners is also relatively very bullish on the stock, designating 8.28 percent of its 13F equity portfolio to HUYA.
As industrywide interest jumped, some big names have been driving this bullishness. Thunderbird Partners, managed by David Fear, initiated the largest position in HUYA Inc. (NYSE:HUYA). Thunderbird Partners had $68.9 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $0.9 million investment in the stock during the quarter. The following funds were also among the new HUYA investors: Michael Gelband's ExodusPoint Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Jinghua Yan's TwinBeech Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as HUYA Inc. (NYSE:HUYA) but similarly valued. These stocks are Comerica Incorporated (NYSE:CMA), Elbit Systems Ltd. (NASDAQ:ESLT), Canopy Growth Corporation (NYSE:CGC), Woori Financial Group Inc. (NYSE:WF), Vivint Solar Inc (NYSE:VSLR), Levi Strauss & Co. (NYSE:LEVI), and CDK Global Inc (NASDAQ:CDK). This group of stocks' market caps are closest to HUYA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CMA,30,453794,-6 ESLT,4,10024,0 CGC,9,19074,-2 WF,2,2940,-3 VSLR,23,736401,11 LEVI,17,51394,1 CDK,28,324989,-4 Average,16.1,228374,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $391 million in HUYA's case. Comerica Incorporated (NYSE:CMA) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. HUYA Inc. (NYSE:HUYA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HUYA is 71.7. 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. This is a slightly positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately HUYA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HUYA were disappointed as the stock returned -15.7% since the end of September (through 12/14) 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 this year.
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Disclosure: None. This article was originally published at Insider Monkey.