Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether So-Young International Inc. (NASDAQ:SY) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
So-Young International Inc. (NASDAQ:SY) has seen an increase in enthusiasm from smart money lately. Our calculations also showed that SY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most investors, hedge funds are perceived as unimportant, outdated financial tools of yesteryear. While there are greater than 8000 funds with their doors open at present, Our experts hone in on the top tier of this group, approximately 850 funds. These hedge fund managers administer bulk of the smart money’s total asset base, and by keeping track of their highest performing equity investments, Insider Monkey has unsheathed various investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Glen Kacher of Light Street Capital
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the new hedge fund action surrounding So-Young International Inc. (NASDAQ:SY).
How have hedgies been trading So-Young International Inc. (NASDAQ:SY)?
At Q4’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 250% from the previous quarter. 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.
Of the funds tracked by Insider Monkey, David Ma’s Composite Capital has the most valuable position in So-Young International Inc. (NASDAQ:SY), worth close to $30 million, corresponding to 5.7% of its total 13F portfolio. The second largest stake is held by Glen Kacher of Light Street Capital, with a $29 million position; 1.7% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism encompass Daniel Gold’s QVT Financial, D. E. Shaw’s D E Shaw and John Overdeck and David Siegel’s 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 5.68% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, dishing out 1.73 percent of its 13F equity portfolio to SY.
Consequently, key money managers were leading the bulls’ herd. Composite Capital, managed by David Ma, initiated the most valuable position in So-Young International Inc. (NASDAQ:SY). Composite Capital had $30 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group, and Israel Englander’s Millennium Management.
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 INMODE LTD. (NASDAQ:INMD), Enviva Partners, LP (NYSE:EVA), Livent Corporation (NYSE:LTHM), and Core-Mark Holding Company, Inc. (NASDAQ:CORE). This group of stocks’ market caps match SY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INMD | 7 | 47683 | 0 |
| EVA | 5 | 111399 | 0 |
| LTHM | 16 | 84627 | -4 |
| CORE | 16 | 24343 | -3 |
| Average | 11 | 67013 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $62 million in SY’s case. Livent Corporation (NYSE:LTHM) is the most popular stock in this table. On the other hand Enviva Partners, LP (NYSE:EVA) is the least popular one with only 5 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 1.0% in 2020 through May 1st but beat the market by 12.9 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 -17.5% during the same time period 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
