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 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded AT&T Inc. (NYSE:T) and determine whether the smart money was really smart about this stock.
Hedge fund interest in AT&T Inc. (NYSE:T) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that T 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). At the end of this article we will also compare T to other stocks including Adobe Inc. (NASDAQ:ADBE), Bank of America Corporation (NYSE:BAC), and Paypal Holdings Inc (NASDAQ:PYPL) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 go through lists like the 10 most profitable companies in America 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s view the key hedge fund action regarding AT&T Inc. (NYSE:T).
What does smart money think about AT&T Inc. (NYSE:T)?
At Q2’s end, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 42 hedge funds held shares or bullish call options in T a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in AT&T Inc. (NYSE:T) was held by Citadel Investment Group, which reported holding $282.7 million worth of stock at the end of September. It was followed by Appaloosa Management LP with a $274.4 million position. Other investors bullish on the company included Adage Capital Management, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Mountain Road Advisors allocated the biggest weight to AT&T Inc. (NYSE:T), around 6.23% of its 13F portfolio. Appaloosa Management LP is also relatively very bullish on the stock, earmarking 4.77 percent of its 13F equity portfolio to T.
Because AT&T Inc. (NYSE:T) has experienced a decline in interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers that slashed their full holdings in the second quarter. Intriguingly, Martin Taylor’s Crake Asset Management sold off the largest stake of the 750 funds monitored by Insider Monkey, worth an estimated $22.9 million in stock, and John Brandmeyer and Jonathan C. Angrist’s Cognios Capital was right behind this move, as the fund cut about $2.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as AT&T Inc. (NYSE:T) but similarly valued. We will take a look at Adobe Inc. (NASDAQ:ADBE), Bank of America Corporation (NYSE:BAC), Paypal Holdings Inc (NASDAQ:PYPL), The Walt Disney Company (NYSE:DIS), Tesla Inc. (NASDAQ:TSLA), Netflix, Inc. (NASDAQ:NFLX), and Novartis AG (NYSE:NVS). All of these stocks’ market caps are similar to T’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADBE | 104 | 9651462 | -11 |
| BAC | 91 | 24357766 | -4 |
| PYPL | 144 | 11406883 | 26 |
| DIS | 105 | 6819839 | 3 |
| TSLA | 63 | 5560864 | 2 |
| NFLX | 113 | 13487546 | 4 |
| NVS | 21 | 1942870 | -9 |
| Average | 91.6 | 10461033 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 91.6 hedge funds with bullish positions and the average amount invested in these stocks was $10461 million. That figure was $1660 million in T’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 21 bullish hedge fund positions. AT&T Inc. (NYSE:T) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for T is 37.8. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 28.2% in 2020 through August 24th and surpassed the market by 20.6 percentage points. Unfortunately T wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); T investors were disappointed as the stock returned 1.1% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
