Hedge Funds Are Dumping Yunji Inc. (YJ)

In this article we will check out the progression of hedge fund sentiment towards Yunji Inc. (NASDAQ:YJ) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Yunji Inc. (NASDAQ:YJ) was in 4 hedge funds’ portfolios at the end of the first quarter of 2020. YJ has experienced a decrease in hedge fund sentiment recently. There were 6 hedge funds in our database with YJ positions at the end of the previous quarter. Our calculations also showed that YJ 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the key hedge fund action encompassing Yunji Inc. (NASDAQ:YJ).

What does smart money think about Yunji Inc. (NASDAQ:YJ)?

Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the fourth quarter of 2019. On the other hand, there were a total of 0 hedge funds with a bullish position in YJ a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Yiheng Capital, managed by Jonathan Guo, holds the number one position in Yunji Inc. (NASDAQ:YJ). Yiheng Capital has a $2 million position in the stock, comprising 0.2% of its 13F portfolio. On Yiheng Capital’s heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $0.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions contain Paul Marshall and Ian Wace’s Marshall Wace LLP, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Yiheng Capital allocated the biggest weight to Yunji Inc. (NASDAQ:YJ), around 0.16% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, setting aside 0.0035 percent of its 13F equity portfolio to YJ.

Seeing as Yunji Inc. (NASDAQ:YJ) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds that slashed their positions entirely heading into Q4. At the top of the heap, Ken Griffin’s Citadel Investment Group cut the largest stake of all the hedgies followed by Insider Monkey, worth about $0.2 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also said goodbye to its stock, about $0.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Yunji Inc. (NASDAQ:YJ). These stocks are Tactile Systems Technology, Inc. (NASDAQ:TCMD), Daqo New Energy Corp (NYSE:DQ), Primoris Services Corp (NASDAQ:PRIM), and Turquoise Hill Resources Ltd (NYSE:TRQ). This group of stocks’ market values are closest to YJ’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TCMD 13 38706 1
DQ 15 43162 1
PRIM 11 33113 0
TRQ 14 156233 -2
Average 13.25 67804 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $3 million in YJ’s case. Daqo New Energy Corp (NYSE:DQ) is the most popular stock in this table. On the other hand Primoris Services Corp (NASDAQ:PRIM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Yunji Inc. (NASDAQ:YJ) is even less popular than PRIM. Hedge funds dodged a bullet by taking a bearish stance towards YJ. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately YJ wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); YJ investors were disappointed as the stock returned -7.1% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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