Is Yalla Group (YALA) a good stock to buy now?
After several tireless days, we finished calculating the numbers for nearly 817 13F files issued by the elite hedge funds and other investment firms that we follow at Insider Monkey, which disclosed the stock portfolios of these companies as of September 30. The results of this effort will be exposed in this article, as we share valuable insight into smart money sentiment towards Yalla Group Limited (NYSE:YALA).
Is the Yalla group (YALA) a good deed to buy now? The best stock pickers were becoming optimistic. The number of long positions in hedge funds has increased by 7 lately. Yalla Group Limited (NYSE:YALA) appeared in the portfolios of 7 hedge funds at the end of the third quarter of 2020. Our calculations also showed that YALA is not among the 30 most popular stocks among hedge funds (click for the Q3 leaderboard and watch the video for a quick rundown of the top 5 stocks).
Video: Watch our video on the 5 most popular hedge fund stocks.
So why do we pay attention to hedge fund sentiment before making investment decisions? Our research has shown that small-cap hedge fund stock picks managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by more than 66 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you are not comfortable with short stocks, you should at least avoid initiating long positions in stocks that are part of our short portfolio.
Lei Zhang of Hillhouse Capital Management
At Insider Monkey, we scour multiple sources to uncover the next big investing idea. For example, the Federal Reserve has created trillions of dollars electronically to keep interest rates close to zero. We believe this will lead to inflation and raise house prices. So we recommended this real estate to our monthly subscribers to our premium newsletter. We go through lists like the 15 best blue chip stocks to choose the best large-cap stocks to buy. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to market arguments at hedge fund conferences. You can subscribe to our free daily newsletter at our website. With all of that in mind, let’s take a look at the new hedge fund action around Yalla Group Limited (NYSE:YALA).
What does the smart money of Yalla Group Limited (NYSE: YALA) think?
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey were long on this stock, a change of 7 from the previous quarter. Below you can see how hedge fund sentiment towards YALA has developed over the past 21 quarters. So let’s see which hedge funds were among the top stock holders and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Lei Zhang Hillhouse Capital Management holds the largest position in Yalla Group Limited (NYSE: YALA), worth nearly $ 14 million, representing 0.1% of its total portfolio of 13F. The second stake is held by Millennium Management, managed by Israel Englander, which has a position of $ 2.9 million; less than 0.1 %% of its 13F portfolio is allocated to the company. Other professional fund managers who are optimistic include Chase Coleman’s Tiger Global Management LLC, Chen Tianqiao Shanda Asset Management and Segantii Capital by Simon Sadler. In terms of the portfolio weights assigned to each position, Pinz Capital assigned the largest weight to Yalla Group Limited (NYSE: YALA), approximately 0.14% of its 13F portfolio. Hillhouse Capital Management is also relatively very bullish on the stock, setting aside 0.11% of its 13F equity portfolio at YALA.
As interest from across the industry grew, major hedge funds jumped head first into Yalla Group Limited (NYSE: YALA). Hillhouse Capital Management, managed by Lei Zhang, initiated the most valuable position in Yalla Group Limited (NYSE: YALA). Hillhouse Capital Management had invested $ 14 million in the company at the end of the quarter. Israel Englander’s Millennium Management also invested $ 2.9 million in the stock during the quarter. The following funds were also among the new investors of YALA: Chase Coleman’s Tiger Global Management LLC, Shanda Asset Management by Chen Tianqiao and Segantii Capital by Simon Sadler.
Now let’s review hedge fund activity in other stocks similar to Yalla Group Limited (NYSE: YALA). We’ll take a look at Xenia Hotels & Resorts Inc (NYSE:XHR), Cornerstone Building Brands, Inc. (NYSE:CN), Standard Motor Products, Inc. (NYSE:SMP), Gravity Co., LTD. (NASDAQ:GRVY), Zogenix, Inc. (NASDAQ:ZGNX), Seacoast Banking Corporation of Florida (NASDAQ:SBCF) and ePlus Inc. (NASDAQ:MORE). All the market caps of these stocks are similar to the market cap of YALA.
[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF position XHR, 9.29036, -1 CNR, 22.84894.3 SMP, 19.86241.4 GRVY, 3.7704, – 1 ZGNX , 38 409878.0 SBCF, 8 10417.1 PLUS, 12 39170, -4 Medium, 15.9 95334.0.3 [/table]
See the table here if you have formatting problems.
As you can see, these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $ 95 million. That figure was $ 22 million in the case of YALA. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular action in this table. On the other hand, Gravity Co., LTD. (NASDAQ:GRVY) is the least popular with only 3 bullish hedge fund positions. Yalla Group Limited (NYSE: YALA) isn’t the least popular stock in this group, but hedge fund interest is still below average. Our overall hedge fund sentiment score for YALA is 19.1. Stocks with a 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 have shown that top 20 most popular stocks among hedge funds, returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2 and have consistently beaten the market by 16 percentage points. A small number of hedge funds were also right to bet on YALA as the stock has returned 92.6% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
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Disclosure: none. This article originally appeared on Monkey initiate.