It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Changyou.Com Ltd (NASDAQ:CYOU) during the quarter below.
Is Changyou.Com Ltd (NASDAQ:CYOU) going to take off soon? The smart money is taking a bullish view. The number of long hedge fund positions moved up by 1 in recent months. Our calculations also showed that CYOU isn’t among the 30 most popular stocks among hedge funds. CYOU was in 7 hedge funds’ portfolios at the end of December. There were 6 hedge funds in our database with CYOU positions at the end of the previous quarter.
In the eyes of most shareholders, hedge funds are seen as underperforming, outdated investment tools of yesteryear. While there are more than 8000 funds trading today, We hone in on the masters of this club, about 750 funds. These hedge fund managers handle the lion’s share of the smart money’s total asset base, and by watching their first-class stock picks, Insider Monkey has formulated various investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to check out the latest hedge fund action regarding Changyou.Com Ltd (NASDAQ:CYOU).
How have hedgies been trading Changyou.Com Ltd (NASDAQ:CYOU)?
At the end of the fourth quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CYOU over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GLG Partners held the most valuable stake in Changyou.Com Ltd (NASDAQ:CYOU), which was worth $25.2 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $15.4 million worth of shares. Moreover, Arrowstreet Capital, Two Sigma Advisors, and Sensato Capital Management were also bullish on Changyou.Com Ltd (NASDAQ:CYOU), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in Changyou.Com Ltd (NASDAQ:CYOU). Arrowstreet Capital had $3 million invested in the company at the end of the quarter. Ernest Chow and Jonathan Howe’s Sensato Capital Management also made a $2.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Warren Lammert’s Granite Point Capital.
Let’s also examine hedge fund activity in other stocks similar to Changyou.Com Ltd (NASDAQ:CYOU). We will take a look at Frontline Ltd (NYSE:FRO), Playa Hotels & Resorts N.V. (NASDAQ:PLYA), Continental Building Products Inc (NYSE:CBPX), and Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI). This group of stocks’ market valuations are similar to CYOU’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FRO | 6 | 30525 | 0 |
| PLYA | 20 | 391454 | 5 |
| CBPX | 16 | 82997 | -2 |
| SPPI | 17 | 83291 | -6 |
| Average | 14.75 | 147067 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $147 million. That figure was $50 million in CYOU’s case. Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is the most popular stock in this table. On the other hand Frontline Ltd (NYSE:FRO) is the least popular one with only 6 bullish hedge fund positions. Changyou.Com Ltd (NASDAQ:CYOU) is not the least popular stock in this group but hedge fund interest is still below average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CYOU wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); CYOU investors were disappointed as the stock returned -13.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
