Hedge Funds Are Souring On HUYA Inc. (HUYA)

In this article we will take a look at whether hedge funds think HUYA Inc. (NYSE:HUYA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is HUYA Inc. (NYSE:HUYA) going to take off soon? Prominent investors are becoming less hopeful. The number of bullish hedge fund bets retreated by 3 recently. 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.

To the average investor there are a large number of gauges investors can use to grade stocks. Some of the most useful gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can trounce the market by a superb margin (see the details here).

Sahm Adrangi Kerrisdale Capital

Sahm Adrangi of Kerrisdale Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. Now let’s take a gander at the latest hedge fund action regarding HUYA Inc. (NYSE:HUYA).

How are hedge funds trading HUYA Inc. (NYSE:HUYA)?

Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in HUYA a year ago. 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?

Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the biggest position in HUYA Inc. (NYSE:HUYA). Renaissance Technologies has a $87.5 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Sahm Adrangi of Kerrisdale Capital, with a $53.6 million position; 10.2% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism encompass Daniel Patrick Gibson’s Sylebra Capital Management, David Ma’s Composite Capital and Michael Rockefeller and KarláKroeker’s Woodline Partners. 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, dishing out 7.79 percent of its 13F equity portfolio to HUYA.

Seeing as HUYA Inc. (NYSE:HUYA) has witnessed falling interest from the smart money, it’s safe to say that there is a sect of money managers that slashed their positions entirely by the end of the first quarter. It’s worth mentioning that David Kowitz and Sheldon Kasowitz’s Indus Capital cut the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at close to $18.2 million in stock. Leung Chi Kit’s fund, Kadensa Capital, also said goodbye to its stock, about $17.9 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to HUYA Inc. (NYSE:HUYA). 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). This group of stocks’ market valuations resemble HUYA’s market valuation.

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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately HUYA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HUYA investors were disappointed as the stock returned 15.1% during the second quarter 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 in 2020.

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