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Yirendai Ltd. (YRD): Are Hedge Funds Right About This Stock?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Yirendai Ltd. (NYSE:YRD).

Is Yirendai Ltd. (NYSE:YRD) a good stock to buy now? Prominent investors are in an optimistic mood. The number of long hedge fund positions advanced by 2 lately. Our calculations also showed that YRD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). YRD was in 5 hedge funds’ portfolios at the end of the third quarter of 2019. There were 3 hedge funds in our database with YRD holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

Izzy Englander of MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to check out the new hedge fund action surrounding Yirendai Ltd. (NYSE:YRD).

Hedge fund activity in Yirendai Ltd. (NYSE:YRD)

At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the previous quarter. The graph below displays the number of hedge funds with bullish position in YRD over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is YRD A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander’s Millennium Management has the number one position in Yirendai Ltd. (NYSE:YRD), worth close to $0.8 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Michael Gelband of ExodusPoint Capital, with a $0.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism include Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position ExodusPoint Capital allocated the biggest weight to Yirendai Ltd. (NYSE:YRD), around 0.01% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, setting aside 0.0012 percent of its 13F equity portfolio to YRD.

As industrywide interest jumped, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, created the most valuable position in Yirendai Ltd. (NYSE:YRD). Millennium Management had $0.8 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group and Renaissance Technologies.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Yirendai Ltd. (NYSE:YRD) but similarly valued. These stocks are Aegion Corp – Class A (NASDAQ:AEGN), Silvercorp Metals Inc. (NYSE:SVM), Universal Logistics Holdings, Inc. (NASDAQ:ULH), and Casa Systems, Inc. (NASDAQ:CASA). This group of stocks’ market values match YRD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AEGN 9 25278 4
SVM 9 36559 0
ULH 12 27543 -1
CASA 11 18858 -2
Average 10.25 27060 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $2 million in YRD’s case. Universal Logistics Holdings, Inc. (NASDAQ:ULH) is the most popular stock in this table. On the other hand Aegion Corp – Class A (NASDAQ:AEGN) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Yirendai Ltd. (NYSE:YRD) is even less popular than AEGN. Hedge funds dodged a bullet by taking a bearish stance towards YRD. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately YRD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); YRD investors were disappointed as the stock returned -26.2% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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