We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Yext, Inc. (NYSE:YEXT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Yext, Inc. (NYSE:YEXT) a superb investment now? Money managers are becoming less hopeful. The number of bullish hedge fund positions went down by 1 recently. Our calculations also showed that YEXT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). YEXT was in 13 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 14 hedge funds in our database with YEXT positions at the end of the previous quarter.
In the eyes of most traders, hedge funds are seen as worthless, old investment tools of yesteryear. While there are over 8000 funds in operation at the moment, We hone in on the leaders of this group, about 850 funds. These money managers control bulk of the hedge fund industry’s total capital, and by observing their best equity investments, Insider Monkey has revealed a number of investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the new hedge fund action surrounding Yext, Inc. (NYSE:YEXT).
Hedge fund activity in Yext, Inc. (NYSE:YEXT)
At Q4’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the third quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in YEXT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, D E Shaw held the most valuable stake in Yext, Inc. (NYSE:YEXT), which was worth $13.8 million at the end of the third quarter. On the second spot was Whetstone Capital Advisors which amassed $10.6 million worth of shares. Cota Capital, Portolan Capital Management, and Two Sigma Advisors 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 Cota Capital allocated the biggest weight to Yext, Inc. (NYSE:YEXT), around 5.17% of its 13F portfolio. Whetstone Capital Advisors is also relatively very bullish on the stock, designating 3.24 percent of its 13F equity portfolio to YEXT.
Judging by the fact that Yext, Inc. (NYSE:YEXT) has experienced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedgies who were dropping their full holdings heading into Q4. Interestingly, Brian Ashford-Russell and Tim Woolley’s Polar Capital said goodbye to the biggest position of the 750 funds followed by Insider Monkey, worth an estimated $21.2 million in stock. Joe DiMenna’s fund, ZWEIG DIMENNA PARTNERS, also sold off its stock, about $3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Yext, Inc. (NYSE:YEXT) but similarly valued. We will take a look at Arcos Dorados Holding Inc (NYSE:ARCO), GCP Applied Technologies Inc. (NYSE:GCP), CNX Resources Corporation (NYSE:CNX), and Fanhua Inc. (NASDAQ:FANH). This group of stocks’ market values resemble YEXT’s market value.
|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 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $279 million. That figure was $47 million in YEXT’s case. GCP Applied Technologies Inc. (NYSE:GCP) is the most popular stock in this table. On the other hand Fanhua Inc. (NASDAQ:FANH) is the least popular one with only 7 bullish hedge fund positions. Yext, Inc. (NYSE:YEXT) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately YEXT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); YEXT investors were disappointed as the stock returned -28.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.