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. 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 have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Sprint Corporation (NYSE:S) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is Sprint Corporation (NYSE:S) going to take off soon? Hedge funds are becoming hopeful. The number of bullish hedge fund bets rose by 11 lately. Our calculations also showed that S isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Paulson of Paulson & Co
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the latest hedge fund action surrounding Sprint Corporation (NYSE:S).
How have hedgies been trading Sprint Corporation (NYSE:S)?
At the end of the fourth quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 46% from the previous quarter. The graph below displays the number of hedge funds with bullish position in S over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Sprint Corporation (NYSE:S), with a stake worth $469.2 million reported as of the end of September. Trailing Renaissance Technologies was Magnetar Capital, which amassed a stake valued at $85 million. Paulson & Co, Arrowstreet Capital, and Alpine Associates 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 HighVista Strategies allocated the biggest weight to Sprint Corporation (NYSE:S), around 2.61% of its 13F portfolio. Havens Advisors is also relatively very bullish on the stock, designating 1.87 percent of its 13F equity portfolio to S.
Now, key hedge funds were breaking ground themselves. Farallon Capital, founded by Thomas Steyer, created the biggest position in Sprint Corporation (NYSE:S). Farallon Capital had $16.7 million invested in the company at the end of the quarter. Shane Finemore’s Manikay Partners also made a $13 million investment in the stock during the quarter. The following funds were also among the new S investors: Himanshu Gulati’s Antara Capital, Benjamin A. Smith’s Laurion Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s go over hedge fund activity in other stocks similar to Sprint Corporation (NYSE:S). These stocks are ORIX Corporation (NYSE:IX), Wipro Limited (NYSE:WIT), Boston Properties, Inc. (NYSE:BXP), and XP Inc. (NASDAQ:XP). This group of stocks’ market values are closest to S’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IX | 6 | 8292 | 1 |
| WIT | 12 | 98211 | 0 |
| BXP | 20 | 450068 | -7 |
| XP | 28 | 398066 | 28 |
| Average | 16.5 | 238659 | 5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $239 million. That figure was $779 million in S’s case. XP Inc. (NASDAQ:XP) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Sprint Corporation (NYSE:S) is more popular among hedge funds. 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 22.3% in 2020 through March 16th but still managed to beat the market by 3.2 percentage points. Hedge funds were also right about betting on S as the stock returned 48.4% so far in Q1 (through March 16th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
