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Hedge Funds Are Dumping Yahoo! Inc. (YHOO)

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Green equity investors are generally advised to start their investing activities by pouring some cash in mutual funds, index funds and exchange-traded funds. For example, the Vanguard S&P 500 ETF provides investors an inexpensive and efficient way to get exposure to the entire pool of stocks included in the S&P 500 benchmark. However, analysts and investors believe that 2016 will represent a good year for active management, as there are numerous attractive investment opportunities due to high dispersion. Dispersion measures the average difference between the return of an index and the return of each component of that index. Therefore, high dispersion rates suggest that the disparity between best-performing stocks and worst-performing stocks is quite high, thus creating attractive conditions for stock pickers. This means that passive management is not likely to generate high returns in 2016. But how can individual investors find potential winners? One way to pin down high-potential stocks is to look at which stocks hedge funds like the most. That being said, let’s take a closer look at what the hedge funds tracked by Insider Monkey think about Yahoo! Inc. (NASDAQ:YHOO).

Yahoo! Inc. (NASDAQ:YHOO) investors should be aware of a decrease in support from the world’s most elite money managers in recent months. YHOO was in 84 hedge funds’ portfolios at the end of December. There were 89 hedge funds in our database with YHOO holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Luxottica Group SpA (ADR) (NYSE:LUX), Emerson Electric Co. (NYSE:EMR), and Sony Corporation (ADR) (NYSE:SNE) to gather more data points.

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According to most investors, hedge funds are seen as slow, old financial vehicles of years past. While there are more than 8000 funds trading at the moment, Our researchers look at the crème de la crème of this group, about 700 funds. It is estimated that this group of investors direct most of the hedge fund industry’s total asset base, and by following their highest performing stock picks, Insider Monkey has uncovered many investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Yahoo! Inc. (NASDAQ:YHOO) has seen its shares decline 25% over the past 12 months, mainly due to a sustained decline in the company’s financial performance. The company has been facing pressure from activist investors, including Jeffrey Smith’s Starboard Value, to sell its Internet businesses. In December 2015, the company announced that the Board decided to abandon the spin-off of its holding in Alibaba Group Holding Ltd (NYSE:BABA), as Yahoo would have had to pay huge taxes  pursuing this transaction. Earlier this year, activist investor Jeffrey Smith sent a letter to Yahoo! Inc. (NASDAQ:YHOO)’s Chief Executive Officer, Marissa Mayer, Chairman and the rest of the Board, saluting the company’s decision to suspend the previously-proposed spin-off of Yahoo’s stake in Alibaba into Aabaco Holdings, which he fiercely opposed throughout 2015. However, the activist investor seemed to be very frustrated about the operating and financial performance of the company’s core Search and Display advertising businesses. The activist investor said that the value of the “Yahoo Stub”, which is simply defined as Yahoo’s market value less the value of the Alibaba stake, was trading near zero at the beginning of January 2015. Therefore, billionaire Jeffrey Smith urged the company to sell its Core Business to either a strategic or financial buyer. In fact, several interested parties have already approached Yahoo’s management and its Board of Directors expressing their interest in buying the company’s core business.

Keeping this in mind, we’re going to check out the key action encompassing Yahoo! Inc. (NASDAQ:YHOO), as well as discuss other recent developments at the company. 

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