Yahoo! Inc. (NASDAQ:YHOO): Insiders Are Dumping, Should You?

Yahoo! Inc. (NASDAQ:YHOO) shareholders have witnessed a decrease in enthusiasm from smart money recently.

According to most investors, hedge funds are assumed to be worthless, outdated financial tools of yesteryear. While there are over 8000 funds trading at present, we at Insider Monkey look at the crème de la crème of this group, around 450 funds. It is widely believed that this group controls the lion’s share of all hedge funds’ total capital, and by watching their top investments, we have determined a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Yahoo iconEqually as important, bullish insider trading activity is another way to break down the financial markets. There are a number of stimuli for a corporate insider to cut shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the market-beating potential of this method if you know what to do (learn more here).

Keeping this in mind, we’re going to take a look at the key action regarding Yahoo! Inc. (NASDAQ:YHOO).

How are hedge funds trading Yahoo! Inc. (NASDAQ:YHOO)?

At the end of the fourth quarter, a total of 60 of the hedge funds we track were long in this stock, a change of -3% from one quarter earlier. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly.

According to our comprehensive database, Third Point, managed by Dan Loeb, holds the biggest position in Yahoo! Inc. (NASDAQ:YHOO). Third Point has a $1.453 billion position in the stock, comprising 26.6% of its 13F portfolio. Sitting at the No. 2 spot is Tiger Global Management LLC, with a $279 million position; the fund has 5.2% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include D. E. Shaw’s D E Shaw, and Jeffrey Tannenbaum’s Fir Tree.

Seeing as Yahoo! Inc. (NASDAQ:YHOO) has witnessed a declination in interest from the smart money, we can see that there was a specific group of funds who sold off their entire stakes last quarter. It’s worth mentioning that Curtis Macnguyen’s Ivory Capital (Investment Mgmt) cut the largest position of the 450+ funds we track, comprising about $121 million in call options. Michael A. Price and Amos Meron’s fund, Empyrean Capital Partners, also sold off its stock, about $100 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds last quarter.

What do corporate executives and insiders think about Yahoo! Inc. (NASDAQ:YHOO)?

Insider purchases made by high-level executives is best served when the company in focus has experienced transactions within the past six months. Over the last six-month time frame, Yahoo! Inc. (NASDAQ:YHOO) has seen zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

With the returns demonstrated by the aforementioned time-tested strategies, retail investors should always monitor hedge fund and insider trading activity, and Yahoo! Inc. (NASDAQ:YHOO) is no exception.

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Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.