We recently published a list of the 10 Cheap Internet Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Yelp Inc. (NYSE:YELP) stands against the other cheap internet stocks to buy according to hedge funds.

Would March See a Pickup in Retail?

On March 6, Jan Kniffen, CEO of J Rogers Kniffen, appeared on CNBC’s ‘Squawk on the Street’ to discuss his outlook on retail. Weaving several threads of news in the retail space, he said that the fourth quarter was great despite an awful January and February due to the weather. However, the market is going to see a pickup in March as the calendar inches closer to Easter because even in the otherwise horrible month of February, the market saw a good Valentine’s Day.

He believed that March would see a pickup because the consumer still feels healthy, even if they are nervous. Spending has been pretty good on everything other than weather-related items, but the traffic has been slow. Kniffen believed that this trend is weather-related as well. He said that he isn’t too concerned yet, but while the retail numbers today may not make one nervous, tomorrow’s numbers may have the opposite effect. According to Kniffen, retailers are only seeing a little weakness, and that’s all weather-related.

READ ALSO: 12 Best Leisure Stocks to Buy Right Now and 12 Best Apparel Stocks to Invest In.

What Could Trump’s Tariffs Mean for the Retail Industry

Talking about the potential effects of tariffs on retailers, he was of the view that power and negotiating skills make up the necessary concoction to deal with the scenario. Companies with better logistics teams, experience with dealing with tariffs strategically, and a healthy position in terms of balance sheet are more likely to do well. Therefore, companies in the sector that are well-financed, boast great teams, and are executing flawlessly will do better than those struggling with dealing with tariffs. While Kniffen said that he couldn’t claim he isn’t worried about the tariffs, he isn’t terrified of them either, as the market knows how to deal with them.

The real question he posed was whether all that the market gets is 10% to 20% in China or whether it would really get 25% in both Canada and Mexico. In the second case, the whole economy gets dislocated, the consumer gets nervous, and everyone is terrified that they will quit spending and the market may go into a consumer-led recession.

However, if the tariffs were imposed only on China, the situation might be different. China has a significant export economy and would have to absorb a big chunk of the tariffs. It did so last time as well and is likely to do the same this time as well. The market will then also see substitution, trade down, and all the stuff we see when the consumer has to deal with it. The retail market will react to all that, and the big and strong members will likely react better.

Our Methodology

We sifted through stock screeners, online rankings, and ETFs to compile a list of internet stocks with forward P/E less than 15, including stocks from the internet retail and internet content & information sectors. We then selected the top 10 with the highest number of hedge fund holders as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A close-up of a person using a mobile device in a restaurant, using the Yelps Reservations feature.

Yelp Inc. (NYSE:YELP)

Forward P/E: 8.54

Number of Hedge Fund Holders: 27

Yelp Inc. (NYSE:YELP) connects consumers with local businesses through the internet. It offers a range of paid and free advertising products to businesses of all sizes, including CPC Advertising (Yelp Ads) and Multi-location Ad Products. This allows businesses to reach a larger audience and boost conversion of their services by advertising their products. Apart from advertising products, the company also offers consumer-interactive features that facilitate transactions between local businesses and consumers.

Yelp Inc. (NYSE:YELP) reported record net revenue and strong profitability in 2024, attributed to the strong execution of its product-led strategy. It accelerated the pace of its innovation, delivering more than 80 new features and updates. Fiscal Q4 2024 marked the 15th consecutive quarter of double-digit year-over-year revenue growth in its categories. Net revenue grew by 6% year-over-year to $1.41 billion, and net income rose 34% year-over-year to $133 million. Yelp Inc. (NYSE:YELP) also reported 8% year-over-year growth in adjusted EBITDA to $358 million.

Services remain to be the focus of the company’s road map and the driver of its business performance. Its new AI chatbot, Yelp Assistant, is also resonating with consumers, with project submissions through this feature up by more than 50% between fiscal Q3 and Q4 2024.

Overall, YELP ranks 8th on our list of the cheap internet stocks to buy according to hedge funds. While we acknowledge the potential of YELP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than YELP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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