At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Telefonica Brasil SA (NYSE:VIV).
Telefonica Brasil SA (NYSE:VIV) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. Our calculations also showed that VIV isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are seen as slow, old investment vehicles of the past. While there are greater than 8000 funds trading at present, Our researchers choose to focus on the crème de la crème of this group, about 850 funds. Most estimates calculate that this group of people watch over most of all hedge funds’ total capital, and by monitoring their top picks, Insider Monkey has uncovered various investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the recent hedge fund action regarding Telefonica Brasil SA (NYSE:VIV).
Hedge fund activity in Telefonica Brasil SA (NYSE:VIV)
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in VIV over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Moerus Capital Management held the most valuable stake in Telefonica Brasil SA (NYSE:VIV), which was worth $28.9 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $20 million worth of shares. Renaissance Technologies, Millennium Management, and AQR Capital Management 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 Moerus Capital Management allocated the biggest weight to Telefonica Brasil SA (NYSE:VIV), around 14.11% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to VIV.
Due to the fact that Telefonica Brasil SA (NYSE:VIV) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedgies who were dropping their entire stakes by the end of the first quarter. Intriguingly, Steve Cohen’s Point72 Asset Management dropped the largest position of the 750 funds tracked by Insider Monkey, worth close to $2.6 million in stock. Michael Moriarty’s fund, Teewinot Capital Advisers, also said goodbye to its stock, about $2.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks similar to Telefonica Brasil SA (NYSE:VIV). We will take a look at Canadian Natural Resources Limited (NYSE:CNQ), Yum China Holdings, Inc. (NYSE:YUMC), Copart, Inc. (NASDAQ:CPRT), and FleetCor Technologies, Inc. (NYSE:FLT). This group of stocks’ market values are similar to VIV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNQ | 26 | 107018 | -3 |
| YUMC | 24 | 721412 | -5 |
| CPRT | 48 | 732842 | 2 |
| FLT | 51 | 1655053 | 7 |
| Average | 37.25 | 804081 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $804 million. That figure was $79 million in VIV’s case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Yum China Holdings, Inc. (NYSE:YUMC) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Telefonica Brasil SA (NYSE:VIV) is even less popular than YUMC. Hedge funds dodged a bullet by taking a bearish stance towards VIV. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but managed to beat the market by 14.8 percentage points. Unfortunately VIV wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); VIV investors were disappointed as the stock returned 4.9% during the second quarter (through June 17th) 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 so far in 2020.
Follow Vivo Participacoes S A (NYSE:VIV)
Follow Vivo Participacoes S A (NYSE:VIV)
Disclosure: None. This article was originally published at Insider Monkey.
