Should I Buy HUYA Inc. (HUYA)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding HUYA Inc. (NYSE:HUYA) and determine whether hedge funds had an edge regarding this stock.

HUYA Inc. (NYSE:HUYA) was in 21 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 22. HUYA investors should be aware of an increase in enthusiasm from smart money of late. There were 18 hedge funds in our database with HUYA positions at the end of the first quarter. Our calculations also showed that HUYA isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In the 21st century investor’s toolkit there are many indicators shareholders use to evaluate their holdings. Two of the less known indicators are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best investment managers can outclass the broader indices by a significant margin (see the details here).

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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let’s check out the fresh hedge fund action encompassing HUYA Inc. (NYSE:HUYA).

Hedge fund activity in HUYA Inc. (NYSE:HUYA)

At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HUYA over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of HUYA Inc. (NYSE:HUYA), with a stake worth $100.3 million reported as of the end of September. Trailing Renaissance Technologies was Composite Capital, which amassed a stake valued at $97.1 million. Kerrisdale Capital, Indus Capital, and Sylebra 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 Composite Capital allocated the biggest weight to HUYA Inc. (NYSE:HUYA), around 9.62% of its 13F portfolio. Kerrisdale Capital is also relatively very bullish on the stock, designating 7.28 percent of its 13F equity portfolio to HUYA.

As industrywide interest jumped, some big names have jumped into HUYA Inc. (NYSE:HUYA) headfirst. Indus Capital, managed by David Kowitz and Sheldon Kasowitz, created the biggest position in HUYA Inc. (NYSE:HUYA). Indus Capital had $25.4 million invested in the company at the end of the quarter. Joseph Samuels’s Islet Management also made a $5.6 million investment in the stock during the quarter. The following funds were also among the new HUYA investors: Louis Bacon’s Moore Global Investments, Ray Dalio’s Bridgewater Associates, and Lee Ainslie’s Maverick Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as HUYA Inc. (NYSE:HUYA) but similarly valued. We will take a look at Toll Brothers Inc (NYSE:TOL), Essent Group Ltd (NYSE:ESNT), ONE Gas Inc (NYSE:OGS), Nevro Corp (NYSE:NVRO), Cameco Corporation (NYSE:CCJ), CMC Materials, Inc. (NASDAQ:CCMP), and Qualys Inc (NASDAQ:QLYS). This group of stocks’ market caps are closest to HUYA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $305 million. That figure was $346 million in HUYA’s case. Toll Brothers Inc (NYSE:TOL) is the most popular stock in this table. On the other hand ONE Gas Inc (NYSE:OGS) is the least popular one with only 20 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. Our overall hedge fund sentiment score for HUYA is 39.3. 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 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on HUYA as the stock returned 28.3% in the third quarter and outperformed the market by an even larger margin.

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