What The Alibaba Spinoff Will Mean For Yahoo Investors Present And Future

Both Alibaba Group Holding Ltd (NYSE:BABA) and Yahoo! Inc. (NASDAQ:YHOO) are down by 45% year-to-date. The smart money tracked by Insider Monkey has shown some faith in Yahoo, which is famously trading in a range that essentially values its operations as worth less than nothing. 104 investment firms we follow held Yahoo in their portfolios on June 30, unchanged from three months earlier.

While hedge fund ownership of Alibaba declined by just one to 85 during the second quarter, investors collectively sold off quite a number of shares during that time. The value of hedgies’ holdings in Alibaba declined by over $1.03 billion to $4.77 billion, even though shares were down by only slightly more than 1% during the second quarter. In Yahoo meanwhile, whose shares fell by more than 10% during the April-to-June period, the value of hedge funds’ holdings fell by less than that, by about $560 million to $5.92 billion. The investors we track held 16.10% of Yahoo’s outstanding shares and just 2.30% of Alibaba’s.

Given all that, it appears this is the wise move for Yahoo to make at the present time, if indeed it has much of a choice. Investors interested in a long-term position in Yahoo will stand to potentially benefit in the near-term. However, they will need to be aware that a hefty hit to the stock could come in the future once the IRS gets around to auditing the transaction.

Disclosure: None