Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

China Social Media Sites: How To Invest In a Rising Star

Page 1 of 2

China social media sites: When it comes to retail investors making use of fresh SEC filings, 13D and 13Gs offer insight into big-time trades as they occur. Hedge funds and other prominent investors issue these filings, and generally speaking, activists file 13Ds and their more passive counterparts use 13G forms. For readers simply searching for novel investment ideas, the latter provides a good launching point for further research.

With that in mind, Robert Pitts and Steadfast Capital recently filed an amended 13G for its stake in YY Inc (ADR) (NASDAQ:YY), and it’s worth taking a look at the position. According to the filing, Steadfast owns about 4.7% of the Chinese social video network, good for about 8.4 million shares. Although peers Tiger Global and Richard Driehaus do hold small positions in YY, there isn’t an extremely high level of interest from other top-tier hedge funds, so this begs the question: why is Steadfast so bullish?

After doing some digging, we think there are four simple reasons why Steadfast is buying.

Jim Chanos on china map


Since going public in late November of last year, YY shares have risen by 342.7%, and this isn’t simply hype-driven appreciation. In its first three quarters post-IPO, the company has more than tripled its earnings—from $0.10 per share in Q4 2012 to $0.35 per share last quarter. We’ll get into the determinants of the earnings growth below, but it’s important to understand that this trend is a result of revenue per user growth and an overall growth in the user base.

In its latest conference call, YY’s CEO David Xueling Li told listeners that average revenue per user statistics “saw solid growth” due to stronger user involvement.  Total ARPU is nowup 16% year-over-year and amounts to RMB346 ($56.53). Li shared that YY Music, whose number of paying users increased by more than 180% year-over-year, was a big part of this growth.

YY executives also said that the total number of paying users grew 60.6% from last year, and now amounts to 440,000. A full year ago, YY’s user base totaled 400.5 million, and now reasonable estimates place user figures close to the450 million-500 million mark. By comparison, SINA Corp (NASDAQ:SINA) had around 400 million registered users at a nearly the exact same time last year. Skype has over 650 million users, while Tencent QQ has at least 780 million. That’s good company to be in, but it’s the next point that sets YY apart.


YY, which gives users the ability to socialize via video chats, has branched out beyond the traditional realm of friend-to-friend chat room services and gaming with YY Music. Within the platform, The New Yorker likens each musician’s live video page to a “theatre,” which “can seem something like a combination of a pop concert and a peep show.” YY’s revenues come from user-specific actions within these theatres, such as if a user buys a performer a virtual lollipop or rose, for example. For each virtual sale, YY typically keeps almost 70% of the transaction (with the rest going to the recipient artist).

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!