In this article we will check out the progression of hedge fund sentiment towards So-Young International Inc. (NASDAQ:SY) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
So-Young International Inc. (NASDAQ:SY) was in 6 hedge funds’ portfolios at the end of March. SY investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. There were 7 hedge funds in our database with SY positions at the end of the previous quarter. Our calculations also showed that SY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Glen Kacher of Light Street Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the recent hedge fund action surrounding So-Young International Inc. (NASDAQ:SY).
How are hedge funds trading So-Young International Inc. (NASDAQ:SY)?
At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SY over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in So-Young International Inc. (NASDAQ:SY) was held by Light Street Capital, which reported holding $18.7 million worth of stock at the end of September. It was followed by Composite Capital with a $15.4 million position. Other investors bullish on the company included Renaissance Technologies, D E Shaw, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Composite Capital allocated the biggest weight to So-Young International Inc. (NASDAQ:SY), around 2.91% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, setting aside 0.98 percent of its 13F equity portfolio to SY.
Seeing as So-Young International Inc. (NASDAQ:SY) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there were a few money managers that slashed their entire stakes last quarter. Interestingly, Daniel Gold’s QVT Financial cut the biggest stake of the 750 funds followed by Insider Monkey, worth about $1.1 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its stock, about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as So-Young International Inc. (NASDAQ:SY) but similarly valued. We will take a look at Super Micro Computer, Inc. (NASDAQ:SMCI), Allegheny Technologies Incorporated (NYSE:ATI), Acadia Realty Trust (NYSE:AKR), and S & T Bancorp Inc (NASDAQ:STBA). All of these stocks’ market caps are closest to SY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMCI | 24 | 432701 | 22 |
| ATI | 26 | 94777 | -1 |
| AKR | 14 | 31992 | 1 |
| STBA | 4 | 3076 | -5 |
| Average | 17 | 140637 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $38 million in SY’s case. Allegheny Technologies Incorporated (NYSE:ATI) is the most popular stock in this table. On the other hand S & T Bancorp Inc (NASDAQ:STBA) is the least popular one with only 4 bullish hedge fund positions. So-Young International Inc. (NASDAQ:SY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately SY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SY investors were disappointed as the stock returned 1.3% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
