After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Yalla Group Limited (NYSE:YALA).
Is Yalla Group (YALA) a good stock to buy now? The best stock pickers were becoming hopeful. The number of long hedge fund positions advanced by 7 lately. Yalla Group Limited (NYSE:YALA) was in 7 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that YALA isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s check out the fresh hedge fund action surrounding Yalla Group Limited (NYSE:YALA).
What does smart money think about Yalla Group Limited (NYSE:YALA)?
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7 from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards YALA over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Lei Zhang’s Hillhouse Capital Management has the biggest position in Yalla Group Limited (NYSE:YALA), worth close to $14 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which holds a $2.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish include Chase Coleman’s Tiger Global Management LLC, Chen Tianqiao’s Shanda Asset Management and Simon Sadler’s Segantii Capital. In terms of the portfolio weights assigned to each position Pinz Capital allocated the biggest weight to Yalla Group Limited (NYSE:YALA), around 0.14% of its 13F portfolio. Hillhouse Capital Management is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to YALA.
As industrywide interest jumped, key hedge funds have jumped into Yalla Group Limited (NYSE:YALA) headfirst. Hillhouse Capital Management, managed by Lei Zhang, initiated the most valuable position in Yalla Group Limited (NYSE:YALA). Hillhouse Capital Management had $14 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $2.9 million investment in the stock during the quarter. The following funds were also among the new YALA investors: Chase Coleman’s Tiger Global Management LLC, Chen Tianqiao’s Shanda Asset Management, and Simon Sadler’s Segantii Capital.
Let’s now review hedge fund activity in other stocks similar to Yalla Group Limited (NYSE:YALA). We will take a look at Xenia Hotels & Resorts Inc (NYSE:XHR), Cornerstone Building Brands, Inc. (NYSE:CNR), Standard Motor Products, Inc. (NYSE:SMP), Gravity Co., LTD. (NASDAQ:GRVY), Zogenix, Inc. (NASDAQ:ZGNX), Seacoast Banking Corporation of Florida (NASDAQ:SBCF), and ePlus Inc. (NASDAQ:PLUS). All of these stocks’ market caps resemble YALA’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $22 million in YALA’s case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Gravity Co., LTD. (NASDAQ:GRVY) is the least popular one with only 3 bullish hedge fund positions. Yalla Group Limited (NYSE:YALA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for YALA is 19.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on YALA as the stock returned 92.6% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.