Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether China Mobile Limited (NYSE:CHL) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
China Mobile Limited (NYSE:CHL) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare CHL to other stocks including Oracle Corporation (NASDAQ:ORCL), SAP AG (NYSE:SAP), and Anheuser-Busch InBev SA/NV (NYSE:BUD) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are dozens of metrics investors employ to evaluate their holdings. Some of the less known metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the S&P 500 by a healthy margin (see the details here).
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind we’re going to go over the new hedge fund action regarding China Mobile Limited (NYSE:CHL).
How have hedgies been trading China Mobile Limited (NYSE:CHL)?
Heading into the first quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CHL over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of China Mobile Limited (NYSE:CHL), with a stake worth $286.3 million reported as of the end of September. Trailing Renaissance Technologies was Ariel Investments, which amassed a stake valued at $40.8 million. Ovata Capital Management, LMR Partners, and ZWEIG DIMENNA PARTNERS were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ovata Capital Management allocated the biggest weight to China Mobile Limited (NYSE:CHL), around 20.07% of its 13F portfolio. ZWEIG DIMENNA PARTNERS is also relatively very bullish on the stock, dishing out 0.9 percent of its 13F equity portfolio to CHL.
Seeing as China Mobile Limited (NYSE:CHL) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers that elected to cut their entire stakes last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, worth close to $71.4 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $4.6 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as China Mobile Limited (NYSE:CHL) but similarly valued. These stocks are Oracle Corporation (NASDAQ:ORCL), SAP AG (NYSE:SAP), Anheuser-Busch InBev SA/NV (NYSE:BUD), and Adobe Inc. (NASDAQ:ADBE). This group of stocks’ market caps are closest to CHL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ORCL | 59 | 3719807 | 3 |
| SAP | 16 | 1763846 | -4 |
| BUD | 23 | 1478846 | 2 |
| ADBE | 106 | 9784116 | 4 |
| Average | 51 | 4186654 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $4187 million. That figure was $386 million in CHL’s case. Adobe Inc. (NASDAQ:ADBE) is the most popular stock in this table. On the other hand SAP AG (NYSE:SAP) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks China Mobile Limited (NYSE:CHL) is even less popular than SAP. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on CHL, though not to the same extent, as the stock returned -13.2% during the same time period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
