Is DOYU Stock A Buy or Sell?

At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not DouYu International Holdings Limited (NASDAQ:DOYU) makes for a good investment right now.

Is DOYU stock a buy? Hedge funds were getting more optimistic. The number of long hedge fund positions increased by 4 in recent months. DouYu International Holdings Limited (NASDAQ:DOYU) was in 27 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 23. This means the bullish number of hedge fund positions in this stock currently sits at a new all time high. Our calculations also showed that DOYU isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 23 hedge funds in our database with DOYU holdings at the end of September.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 124 percentage points since March 2017 (see the details here).

Matthew Halbower of Pentwater Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 take a look at the recent hedge fund action surrounding DouYu International Holdings Limited (NASDAQ:DOYU).

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

Heading into the first quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in DOYU 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.

When looking at the institutional investors followed by Insider Monkey, Alpine Associates, managed by Robert Emil Zoellner, holds the largest position in DouYu International Holdings Limited (NASDAQ:DOYU). Alpine Associates has a $39.2 million position in the stock, comprising 1.6% of its 13F portfolio. Sitting at the No. 2 spot is Segantii Capital, managed by Simon Sadler, which holds a $33 million position; 1.5% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish consist of Matthew Halbower’s Pentwater Capital Management, Matthew Moskey and Friedrich Schulte-Hillen’s Athos Capital and Michael Rockefeller and Karl Kroeker’s Woodline Partners. In terms of the portfolio weights assigned to each position Athos Capital allocated the biggest weight to DouYu International Holdings Limited (NASDAQ:DOYU), around 5.5% of its 13F portfolio. HighVista Strategies is also relatively very bullish on the stock, designating 1.76 percent of its 13F equity portfolio to DOYU.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Alpine Associates, managed by Robert Emil Zoellner, initiated the most outsized position in DouYu International Holdings Limited (NASDAQ:DOYU). Alpine Associates had $39.2 million invested in the company at the end of the quarter. Matthew Halbower’s Pentwater Capital Management also made a $25.7 million investment in the stock during the quarter. The following funds were also among the new DOYU investors: Matthew Moskey and Friedrich Schulte-Hillen’s Athos Capital, Michael Rockefeller and Karl Kroeker’s Woodline Partners, and Benjamin A. Smith’s Laurion Capital Management.

Let’s go over hedge fund activity in other stocks similar to DouYu International Holdings Limited (NASDAQ:DOYU). These stocks are Allogene Therapeutics, Inc. (NASDAQ:ALLO), CIT Group Inc. (NYSE:CIT), SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), EnerSys (NYSE:ENS), Shake Shack Inc (NYSE:SHAK), Legend Biotech Corporation (NASDAQ:LEGN), and Wintrust Financial Corporation (NASDAQ:WTFC). This group of stocks’ market caps are similar to DOYU’s market cap.

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As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $475 million. That figure was $238 million in DOYU’s case. CIT Group Inc. (NYSE:CIT) is the most popular stock in this table. On the other hand Legend Biotech Corporation (NASDAQ:LEGN) is the least popular one with only 13 bullish hedge fund positions. DouYu International Holdings Limited (NASDAQ:DOYU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DOYU is 77.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately DOYU wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on DOYU were disappointed as the stock returned -7.3% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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