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Did Hedge Funds Make The Right Call On HUYA Inc. (HUYA) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtHUYA Inc. (NYSE:HUYA) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

HUYA Inc. (NYSE:HUYA) was in 18 hedge funds’ portfolios at the end of March. HUYA investors should pay attention to a decrease in hedge fund interest recently. There were 21 hedge funds in our database with HUYA positions at the end of the previous quarter. Our calculations also showed that HUYA 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Howard Marks of Oaktree Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a glance at the new hedge fund action encompassing HUYA Inc. (NYSE:HUYA).

How have hedgies been trading HUYA Inc. (NYSE:HUYA)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HUYA over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is HUYA A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of HUYA Inc. (NYSE:HUYA), with a stake worth $87.5 million reported as of the end of September. Trailing Renaissance Technologies was Kerrisdale Capital, which amassed a stake valued at $53.6 million. Sylebra Capital Management, Composite Capital, and Woodline Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kerrisdale Capital allocated the biggest weight to HUYA Inc. (NYSE:HUYA), around 10.25% of its 13F portfolio. Composite Capital is also relatively very bullish on the stock, earmarking 7.79 percent of its 13F equity portfolio to HUYA.

Because HUYA Inc. (NYSE:HUYA) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there was a specific group of funds that elected to cut their positions entirely by the end of the first quarter. Intriguingly, David Kowitz and Sheldon Kasowitz’s Indus Capital cut the biggest investment of all the hedgies tracked by Insider Monkey, totaling about $18.2 million in stock, and Leung Chi Kit’s Kadensa Capital was right behind this move, as the fund said goodbye to about $17.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as HUYA Inc. (NYSE:HUYA) but similarly valued. These stocks are Woodward Inc (NASDAQ:WWD), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), Eaton Vance Corp (NYSE:EV), and Wright Medical Group N.V. (NASDAQ:WMGI). All of these stocks’ market caps are similar to HUYA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WWD 24 222038 2
OCFT 3 1431 -6
EV 20 37006 -4
WMGI 37 877799 -9
Average 21 284569 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $285 million. That figure was $265 million in HUYA’s case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 3 bullish hedge fund positions. HUYA Inc. (NYSE:HUYA) is not the least popular stock in this group but hedge fund interest is still below average. 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on HUYA, though not to the same extent, as the stock returned 32% since Q1 and outperformed the market.

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