Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT) .
Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT) was in 7 hedge funds’ portfolios at the end of September. CHT investors should be aware of a decrease in enthusiasm from smart money lately. There were 10 hedge funds in our database with CHT holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as State Street Corporation (NYSE:STT), Tata Motors Limited (ADR) (NYSE:TTM), and Kellogg Company (NYSE:K) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, let’s analyze the fresh action regarding Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT).
What does the smart money think about Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT)?
Heading into the fourth quarter of 2016, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 30% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHT over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the largest hedge funds in the world has the number one position in Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT), worth close to $82.6 million, comprising 0.1% of its total 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $27.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Matthew Tewksbury’s Stevens Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that sold off their entire stakes in the stock during the third quarter. At the top of the heap, Michael Platt and William Reeves’ BlueCrest Capital Mgmt. sold off the biggest position of all the investors monitored by Insider Monkey, totaling about $4.3 million in stock, and Ernest Chow and Jonathan Howe’s Sensato Capital Management was right behind this move, as the fund sold off about $2.6 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks similar to Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT). We will take a look at State Street Corporation (NYSE:STT), Tata Motors Limited (ADR) (NYSE:TTM), Kellogg Company (NYSE:K), and Deere & Company (NYSE:DE). This group of stocks’ market values resemble CHT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STT | 31 | 633743 | -2 |
| TTM | 22 | 844281 | 10 |
| K | 39 | 1306871 | 12 |
| DE | 27 | 3324122 | -6 |
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1.53 billion. That figure was $119 million in CHT’s case. Kellogg Company (NYSE:K) is the most popular stock in this table. On the other hand Tata Motors Limited (ADR) (NYSE:TTM) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT) is even less popular than TTM. 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
