Is YY Inc (ADR) (NASDAQ:YY) 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 (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) 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.
YY Inc (ADR) (NASDAQ:YY) was in 18 hedge funds’ portfolios at the end of the third quarter of 2015. YY shareholders have witnessed a decrease in hedge fund interest of late. There were 25 hedge funds in our database with YY positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Radius Health Inc (NASDAQ:RDUS), DCT Industrial Trust Inc. (NYSE:DCT), and Ubiquiti Networks Inc (NASDAQ:UBNT) to gather more data points.
To most market participants, hedge funds are seen as unimportant, old financial vehicles of years past. While there are more than 8000 funds trading at the moment, We look at the moguls of this club, approximately 700 funds. Most estimates calculate that this group of people oversee the lion’s share of the hedge fund industry’s total capital, and by keeping an eye on their best stock picks, Insider Monkey has formulated a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
With all of this in mind, we’re going to take a look at the fresh action regarding YY Inc (ADR) (NASDAQ:YY).
How are hedge funds trading YY Inc (ADR) (NASDAQ:YY)?
Heading into Q4, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 28% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Graham Capital Management, managed by Kenneth Tropin, holds the biggest position in YY Inc (ADR) (NASDAQ:YY). The fund reportedly holds a $33.2 million position in the stock, comprising 4% of its 13F portfolio. On Graham Capital Management’s heels is Frank Brosens of Taconic Capital, with a $32.7 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish include Glen Kacher’s Light Street Capital, Kerr Neilson’s Platinum Asset Management and Matthew Hulsizer’s PEAK6 Capital Management.
Because YY Inc (ADR) (NASDAQ:YY) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers that slashed their positions entirely by the end of the third quarter. Interestingly, Rob Citrone’s Discovery Capital Management cut the largest investment of the 700 funds monitored by Insider Monkey, totaling $54.3 million in call options, and Emanuel J. Friedman’s EJF Capital was right behind this move, as the fund sold off about $15.1 million worth of shares. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as YY Inc (ADR) (NASDAQ:YY) but similarly valued. These stocks are Radius Health Inc (NASDAQ:RDUS), DCT Industrial Trust Inc. (NYSE:DCT), Ubiquiti Networks Inc (NASDAQ:UBNT), and Hill-Rom Holdings, Inc. (NYSE:HRC). This group of stocks’ market values are similar to YY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDUS | 23 | 562792 | 0 |
| DCT | 8 | 130423 | -1 |
| UBNT | 10 | 150343 | -2 |
| HRC | 21 | 339896 | -1 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was just $148 million in YY’s case. Radius Health Inc (NASDAQ:RDUS) is the most popular stock in this table, while DCT Industrial Trust Inc. (NYSE:DCT) is the laggard with only 8 bullish hedge fund positions. YY Inc (ADR) (NASDAQ:YY) 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. In this regard RDUS might be a better candidate to consider a long position.
