The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Yahoo! Inc. (NASDAQ:YHOO) and find out how it is affected by hedge funds’ moves.
Is Yahoo! Inc. (NASDAQ:YHOO) a buy right now? The best stock pickers are getting less bullish. The number of bullish hedge fund positions went down by 15 recently. YHOO was in 89 hedge funds’ portfolio at the end of the third quarter of 2015. There were 104 hedge funds in our database with YHOO positions at the end of the previous quarter.
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In the 21st century investor’s toolkit there are a multitude of signals market participants have at their disposal to evaluate stocks. Some of the less known signals are hedge fund and insider trading indicators. Experts at Insider Monkey, a website specializing in hedge funds, have shown that, historically, those who follow the best picks of the top investment managers can beat the market by a superb margin (see the details here).
With all of this in mind, we’re going to review the recent action encompassing Yahoo! Inc. (NASDAQ:YHOO).
How have hedgies been trading Yahoo! Inc. (NASDAQ:YHOO)?
At the end of the third quarter, a total of 89 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings considerably.
According to hedge fund experts at Insider Monkey, Kenneth Mario Garschina’s Mason Capital Management had the biggest position in Yahoo! Inc. (NASDAQ:YHOO), worth close to $472.8 million, accounting for 10% of its total 13F portfolio. Sitting at the No. 2 spot is Christian Leone of Luxor Capital Group, with a $305.7 million position; the fund has 7% of its 13F portfolio invested in the stock. The remaining members of the smart money that hold long positions encompass D. E. Shaw’s D E Shaw, Jeffrey Altman’s Owl Creek Asset Management and Ken Griffin’s Citadel Investment Group.
Judging by the fact that Yahoo! Inc. (NASDAQ:YHOO) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that elected to cut their positions entirely in the third quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising about $100.7 million in stock, and Richard Barrera of Roystone Capital Partners was right behind this move, as the fund cut about $85.5 million worth. These moves are interesting, as total hedge fund interest was cut by 15 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Yahoo! Inc. (NASDAQ:YHOO). These stocks are Johnson Controls, Inc. (NYSE:JCI), DISH Network Corp. (NASDAQ:DISH), Banco Bradesco SA (ADR) (NYSE:BBD), and Imperial Oil Limited (USA) (NYSEAMEX:IMO). This group of stocks’ market caps are similar to YHOO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JCI | 32 | 478236 | -9 |
| DISH | 53 | 3089941 | -15 |
| BBD | 11 | 146176 | -4 |
| IMO | 9 | 76127 | -2 |
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $948 million. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand Imperial Oil Limited (USA) (NYSEAMEX:IMO) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Yahoo! Inc. (NASDAQ:YHOO) is more popular among hedge funds. Considering that hedge funds are fond of this stock, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
