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Yandex NV (YNDX): Are Hedge Funds Right About This Stock?

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 Yandex NV (NASDAQ:YNDX) and determine whether hedge funds had an edge regarding this stock.

Is Yandex NV (NASDAQ:YNDX) worth your attention right now? The best stock pickers were in an optimistic mood. The number of long hedge fund positions inched up by 9 lately. Yandex NV (NASDAQ:YNDX) was in 44 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 48. Our calculations also showed that YNDX 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). There were 35 hedge funds in our database with YNDX positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 58 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.

John Armitage Egerton Capital

John Armitage of Egerton Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Now we’re going to take a peek at the recent hedge fund action regarding Yandex NV (NASDAQ:YNDX).

Hedge fund activity in Yandex NV (NASDAQ:YNDX)

At the end of June, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from the first quarter of 2020. On the other hand, there were a total of 30 hedge funds with a bullish position in YNDX a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in Yandex NV (NASDAQ:YNDX), which was worth $294.4 million at the end of the third quarter. On the second spot was Egerton Capital Limited which amassed $272.6 million worth of shares. GQG Partners, Arrowstreet Capital, and Jericho Capital Asset 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 Solel Partners allocated the biggest weight to Yandex NV (NASDAQ:YNDX), around 7.49% of its 13F portfolio. Tiger Legatus Capital is also relatively very bullish on the stock, earmarking 4.2 percent of its 13F equity portfolio to YNDX.

Now, key money managers have been driving this bullishness. Jericho Capital Asset Management, managed by Josh Resnick, established the largest position in Yandex NV (NASDAQ:YNDX). Jericho Capital Asset Management had $57.8 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $40.7 million investment in the stock during the quarter. The following funds were also among the new YNDX investors: Emanuel J. Friedman’s EJF Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Matthew L Pinz’s Pinz Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Yandex NV (NASDAQ:YNDX) but similarly valued. We will take a look at Peloton Interactive, Inc. (NASDAQ:PTON), CGI Inc. (NYSE:GIB), Fox Corporation (NASDAQ:FOX), Fox Corporation (NASDAQ:FOXA), Maxim Integrated Products Inc. (NASDAQ:MXIM), Laboratory Corp. of America Holdings (NYSE:LH), and Amcor plc (NYSE:AMCR). This group of stocks’ market values match YNDX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PTON 50 2109831 14
GIB 19 259686 1
FOX 20 566122 -2
FOXA 35 1611691 -3
MXIM 33 323780 3
LH 52 1579826 7
AMCR 16 201571 -3
Average 32.1 950358 2.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $950 million. That figure was $1404 million in YNDX’s case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand Amcor plc (NYSE:AMCR) is the least popular one with only 16 bullish hedge fund positions. Yandex NV (NASDAQ:YNDX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for YNDX is 76.4. 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. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on YNDX as the stock returned 36.4% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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