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Did Hedge Funds Drop The Ball On China Yuchai International Limited (CYD) ?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of China Yuchai International Limited (NYSE:CYD).

China Yuchai International Limited (NYSE:CYD) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of the fourth quarter of 2018. At the end of this article we will also compare CYD to other stocks including Ennis, Inc. (NYSE:EBF), OrthoPediatrics Corp. (NASDAQ:KIDS), and Eidos Therapeutics, Inc. (NASDAQ:EIDX) to get a better sense of its popularity.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

Let’s take a gander at the recent hedge fund action surrounding China Yuchai International Limited (NYSE:CYD).

What does the smart money think about China Yuchai International Limited (NYSE:CYD)?

At Q4’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards CYD over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CYD Positions

Among these funds, Shah Capital Management held the most valuable stake in China Yuchai International Limited (NYSE:CYD), which was worth $42.3 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $4.5 million worth of shares. Moreover, Sensato Capital Management, Arrowstreet Capital, and Two Sigma Advisors were also bullish on China Yuchai International Limited (NYSE:CYD), allocating a large percentage of their portfolios to this stock.

Since China Yuchai International Limited (NYSE:CYD) has experienced a decline in interest from the smart money, it’s easy to see that there was a specific group of funds that slashed their positions entirely by the end of the third quarter. Intriguingly, J. Alan Reid, Jr.’s Forward Management sold off the largest position of all the hedgies monitored by Insider Monkey, comprising an estimated $1.9 million in stock. Jeffrey Talpins’s fund, Element Capital Management, also sold off its stock, about $0.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to China Yuchai International Limited (NYSE:CYD). These stocks are Ennis, Inc. (NYSE:EBF), OrthoPediatrics Corp. (NASDAQ:KIDS), Eidos Therapeutics, Inc. (NASDAQ:EIDX), and Avianca Holdings SA (NYSE:AVH). This group of stocks’ market valuations are similar to CYD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EBF 12 65136 1
KIDS 5 29048 -2
EIDX 8 116233 -6
AVH 4 5892 0
Average 7.25 54077 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $55 million in CYD’s case. Ennis, Inc. (NYSE:EBF) is the most popular stock in this table. On the other hand Avianca Holdings SA (NYSE:AVH) is the least popular one with only 4 bullish hedge fund positions. China Yuchai International Limited (NYSE:CYD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on CYD as the stock returned 42.3% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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