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 March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded 111, Inc. (NASDAQ:YI) based on those filings.
Is 111, Inc. (NASDAQ:YI) a sound investment right now? Prominent investors are in a bullish mood. The number of bullish hedge fund positions rose by 1 in recent months. Our calculations also showed that YI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). YI was in 3 hedge funds’ portfolios at the end of the first quarter of 2020. There were 2 hedge funds in our database with YI positions at the end of the previous quarter.
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 44 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.
Jim Simons of Renaissance Technologies
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 analyze the latest hedge fund action surrounding 111, Inc. (NASDAQ:YI).
Hedge fund activity in 111, Inc. (NASDAQ:YI)
At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards YI over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in 111, Inc. (NASDAQ:YI) was held by Totem Point Management, which reported holding $6.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $0.2 million position. The only other hedge fund that is bullish on the company was Springbok Capital.
Consequently, some big names have jumped into 111, Inc. (NASDAQ:YI) headfirst. Renaissance Technologies, founded by Jim Simons, established the biggest position in 111, Inc. (NASDAQ:YI). Renaissance Technologies had $0.2 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $0.2 million position during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as 111, Inc. (NASDAQ:YI) but similarly valued. These stocks are Northfield Bancorp Inc (NASDAQ:NFBK), Harsco Corporation (NYSE:HSC), Forrester Research, Inc. (NASDAQ:FORR), and BrightSphere Investment Group plc (NYSE:BSIG). This group of stocks’ market values are similar to YI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NFBK | 6 | 28889 | 1 |
| HSC | 16 | 64647 | -5 |
| FORR | 8 | 55803 | -2 |
| BSIG | 20 | 185201 | -6 |
| Average | 12.5 | 83635 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $7 million in YI’s case. BrightSphere Investment Group plc (NYSE:BSIG) is the most popular stock in this table. On the other hand Northfield Bancorp Inc (NASDAQ:NFBK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks 111, Inc. (NASDAQ:YI) is even less popular than NFBK. Hedge funds dodged a bullet by taking a bearish stance towards YI. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately YI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); YI investors were disappointed as the stock returned 7.3% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
