Is Yatsen Holding Limited (YSG) A Good Stock To Buy?

We at Insider Monkey have gone over 866 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article, we look at what those funds think of Yatsen Holding Limited (NYSE:YSG) based on that data.

Is YSG a good stock to buy? The best stock pickers were taking a bearish view. The number of long hedge fund positions fell by 6 lately. Yatsen Holding Limited (NYSE:YSG) was in 20 hedge funds’ portfolios at the end of March. The all time high for this statistic is 26. Our calculations also showed that YSG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Seth Fischer Oasis Management

Seth Fischer of Oasis Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind we’re going to take a look at the latest hedge fund action encompassing Yatsen Holding Limited (NYSE:YSG).

Do Hedge Funds Think YSG Is A Good Stock To Buy Now?

At first quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in YSG over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

More specifically, Tiger Global Management LLC was the largest shareholder of Yatsen Holding Limited (NYSE:YSG), with a stake worth $70.6 million reported as of the end of March. Trailing Tiger Global Management LLC was Sylebra Capital Management, which amassed a stake valued at $57.3 million. Tairen Capital, Hidden Lake Asset Management, and Candlestick Capital Management 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 0 allocated the biggest weight to Yatsen Holding Limited (NYSE:YSG), around 7.96% of its 13F portfolio. 0 is also relatively very bullish on the stock, designating 2.49 percent of its 13F equity portfolio to YSG.

Because Yatsen Holding Limited (NYSE:YSG) has witnessed declining sentiment from hedge fund managers, we can see that there were a few funds who were dropping their entire stakes by the end of the first quarter. Intriguingly, Xiaomeng Tong’s Boyu Capital dumped the biggest position of the 750 funds followed by Insider Monkey, comprising close to $11.8 million in stock, and Daniel Sundheim’s D1 Capital Partners was right behind this move, as the fund sold off about $8.5 million worth. These moves are important to note, as aggregate hedge fund interest fell by 6 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Yatsen Holding Limited (NYSE:YSG) but similarly valued. These stocks are Concentrix Corporation (NASDAQ:CNXC), Ternium S.A. (NYSE:TX), Fiverr International Ltd. (NYSE:FVRR), National Retail Properties, Inc. (NYSE:NNN), Anaplan, Inc. (NYSE:PLAN), Fate Therapeutics Inc (NASDAQ:FATE), and Fastly, Inc. (NYSE:FSLY). This group of stocks’ market valuations match YSG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNXC 23 576745 2
TX 14 203694 1
FVRR 27 398791 -2
NNN 22 289672 8
PLAN 55 2367556 -8
FATE 39 2634993 5
FSLY 26 1323528 -6
Average 29.4 1113568 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $1114 million. That figure was $225 million in YSG’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand Ternium S.A. (NYSE:TX) is the least popular one with only 14 bullish hedge fund positions. Yatsen Holding Limited (NYSE:YSG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for YSG is 29.4. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately YSG wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); YSG investors were disappointed as the stock returned -37.2% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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