You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is China Unicom (Hong Kong) Limited (NYSE:CHU) a worthy investment now? The best stock pickers are taking a pessimistic view. The number of bullish hedge fund positions fell by 3 recently. Our calculations also showed that CHU isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the fresh hedge fund action regarding China Unicom (Hong Kong) Limited (NYSE:CHU).
How have hedgies been trading China Unicom (Hong Kong) Limited (NYSE:CHU)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHU over the last 13 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’s Renaissance Technologies has the most valuable position in China Unicom (Hong Kong) Limited (NYSE:CHU), worth close to $27.3 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $19.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish consist of Israel Englander’s Millennium Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. and John Overdeck and David Siegel’s Two Sigma Advisors.
Since China Unicom (Hong Kong) Limited (NYSE:CHU) has experienced declining sentiment from the smart money, it’s easy to see that there was a specific group of funds that elected to cut their full holdings in the third quarter. At the top of the heap, Charles Clough’s Clough Capital Partners said goodbye to the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth about $0.8 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dropped about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as China Unicom (Hong Kong) Limited (NYSE:CHU) but similarly valued. We will take a look at Halliburton Company (NYSE:HAL), Manulife Financial Corporation (NYSE:MFC), Nutrien Ltd. (NYSE:NTR), and National Grid plc (NYSE:NGG). This group of stocks’ market valuations are closest to CHU’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HAL | 39 | 789589 | -5 |
| MFC | 21 | 389083 | 5 |
| NTR | 35 | 818245 | 8 |
| NGG | 11 | 237302 | -2 |
| Average | 26.5 | 558555 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $559 million. That figure was $54 million in CHU’s case. Halliburton Company (NYSE:HAL) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks China Unicom (Hong Kong) Limited (NYSE:CHU) is even less popular than NGG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
