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Is YEXT A Good Stock To Buy Now?

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Abigail Fisher
·6 min read
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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Yext, Inc. (NYSE:YEXT) based on those filings.

Is YEXT a good stock to buy now? Yext, Inc. (NYSE:YEXT) was in 11 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 23. YEXT investors should pay attention to an increase in activity from the world's largest hedge funds lately. There were 10 hedge funds in our database with YEXT holdings at the end of June. Our calculations also showed that YEXT 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Peter Algert of Algert Global

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. With all of this in mind let's view the fresh hedge fund action encompassing Yext, Inc. (NYSE:YEXT).

Do Hedge Funds Think YEXT Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards YEXT over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Yext, Inc. (NYSE:YEXT) was held by D E Shaw, which reported holding $7.9 million worth of stock at the end of September. It was followed by GLG Partners with a $6.2 million position. Other investors bullish on the company included Citadel Investment Group, PDT Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Levin Capital Strategies allocated the biggest weight to Yext, Inc. (NYSE:YEXT), around 0.14% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.1 percent of its 13F equity portfolio to YEXT.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Paloma Partners, managed by Donald Sussman, assembled the largest position in Yext, Inc. (NYSE:YEXT). Paloma Partners had $0.6 million invested in the company at the end of the quarter. Peter Algert's Algert Global also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Steve Cohen's Point72 Asset Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Yext, Inc. (NYSE:YEXT) but similarly valued. We will take a look at American National Group, Inc. (NASDAQ:ANAT), IAMGOLD Corporation (NYSE:IAG), Investors Bancorp, Inc. (NASDAQ:ISBC), Ambarella Inc (NASDAQ:AMBA), Euronav NV (NYSE:EURN), Barnes Group Inc. (NYSE:B), and Enable Midstream Partners LP (NYSE:ENBL). This group of stocks' market caps resemble YEXT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ANAT,12,30001,2 IAG,16,151044,-2 ISBC,28,138234,3 AMBA,34,191991,7 EURN,11,67614,-6 B,13,37329,-6 ENBL,4,8820,-1 Average,16.9,89290,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $25 million in YEXT's case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 4 bullish hedge fund positions. Yext, Inc. (NYSE:YEXT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for YEXT is 32. 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 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately YEXT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); YEXT investors were disappointed as the stock returned 4.8% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.

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

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