Is Yelp Inc (NYSE:YELP) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Yelp Inc (NYSE:YELP) has experienced a decrease in enthusiasm from smart money recently. YELP was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 30 hedge funds in our database with YELP holdings at the end of the previous quarter. Our calculations also showed that YELP isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a look at the new hedge fund action encompassing Yelp Inc (NYSE:YELP).
Hedge fund activity in Yelp Inc (NYSE:YELP)
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards YELP 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, SQN Investors held the most valuable stake in Yelp Inc (NYSE:YELP), which was worth $116.8 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $110.2 million worth of shares. Moreover, SoMa Equity Partners, EastBay Asset Management, and D E Shaw were also bullish on Yelp Inc (NYSE:YELP), allocating a large percentage of their portfolios to this stock.
Since Yelp Inc (NYSE:YELP) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of fund managers who sold off their positions entirely by the end of the third quarter. At the top of the heap, James Crichton’s Hitchwood Capital Management cut the largest stake of the 700 funds followed by Insider Monkey, totaling close to $29.5 million in stock, and Paul Reeder and Edward Shapiro’s PAR Capital Management was right behind this move, as the fund sold off about $24.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 6 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Yelp Inc (NYSE:YELP) but similarly valued. We will take a look at Evercore Inc. (NYSE:EVR), Antero Resources Corp (NYSE:AR), B2Gold Corp (NYSE:BTG), and Gold Fields Limited (NYSE:GFI). This group of stocks’ market values are similar to YELP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EVR | 24 | 303273 | 2 |
| AR | 22 | 920124 | 2 |
| BTG | 17 | 104860 | 3 |
| GFI | 9 | 160670 | -1 |
| Average | 18 | 372232 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $578 million in YELP’s case. Evercore Inc. (NYSE:EVR) is the most popular stock in this table. On the other hand Gold Fields Limited (NYSE:GFI) is the least popular one with only 9 bullish hedge fund positions. Yelp Inc (NYSE:YELP) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 YELP wasn’t nearly as popular as these 15 stock and hedge funds that were betting on YELP were disappointed as the stock returned 5.6% 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.
