Is Yahoo! Inc. (YHOO) Going to Burn These Hedge Funds?

Yahoo! Inc. (NASDAQ:YHOO) was in 66 hedge funds’ portfolios at the end of March. YHOO has experienced a decrease in hedge fund interest recently. There were 71 hedge funds in our database with YHOO positions at the end of the previous quarter.

According to most stock holders, hedge funds are seen as slow, old investment vehicles of years past. While there are more than 8000 funds trading at present, we at Insider Monkey hone in on the aristocrats of this club, around 450 funds. It is estimated that this group oversees most of the smart money’s total asset base, and by paying attention to their highest performing stock picks, we have formulated a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as beneficial, positive insider trading sentiment is a second way to parse down the investments you’re interested in. Obviously, there are a variety of motivations for an executive to drop shares of his or her company, but just one, very clear reason why they would behave bullishly. Several empirical studies have demonstrated the useful potential of this tactic if you understand where to look (learn more here).

With these “truths” under our belt, let’s take a gander at the recent action encompassing Yahoo! Inc. (NASDAQ:YHOO).

How have hedgies been trading Yahoo! Inc. (NASDAQ:YHOO)?

Heading into Q2, a total of 66 of the hedge funds we track held long positions in this stock, a change of -7% from the previous quarter.

Judging by the fact that Yahoo! Inc. (NASDAQ:YHOO) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Chase Coleman and Feroz Dewan’s fund cut the largest position of the 450+ funds we monitor, valued at an estimated $278.6 million in stock, and James Dinan of York Capital Management was right behind this move, as the fund said goodbye to about $125.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 5 funds last quarter.

How have insiders been trading Yahoo! Inc. (NASDAQ:YHOO)?

Insider purchases made by high-level executives is best served when the primary stock in question has seen transactions within the past half-year. Over the last six-month time frame, Yahoo! Inc. (NASDAQ:YHOO) has seen zero unique insiders buying, and 3 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Yahoo! Inc. (NASDAQ:YHOO). These stocks are Tripadvisor Inc (NASDAQ:TRIP), Yandex NV (NASDAQ:YNDX), Facebook Inc (NASDAQ:FB), LinkedIn Corp (NYSE:LNKD), and Baidu.com, Inc. (ADR) (NASDAQ:BIDU). This group of stocks belong to the internet information providers industry and their market caps are closest to YHOO’s market cap.

With the results exhibited by our tactics, retail investors should always keep an eye on hedge fund and insider trading sentiment, and Yahoo! Inc. (NASDAQ:YHOO) is no exception.

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