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 take a look at whether Vodafone Group Plc (NASDAQ:VOD) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Vodafone Group Plc (NASDAQ:VOD) investors should be aware of a decrease in hedge fund interest recently. VOD was in 16 hedge funds’ portfolios at the end of December. There were 20 hedge funds in our database with VOD holdings at the end of the previous quarter. Our calculations also showed that VOD 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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 let’s take a look at the new hedge fund action regarding Vodafone Group Plc (NASDAQ:VOD).
How are hedge funds trading Vodafone Group Plc (NASDAQ:VOD)?
Heading into the first quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VOD over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Vodafone Group Plc (NASDAQ:VOD), with a stake worth $656.7 million reported as of the end of September. Trailing Renaissance Technologies was Levin Easterly Partners, which amassed a stake valued at $42.4 million. Segantii Capital, Citadel Investment Group, and Millennium 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 Segantii Capital allocated the biggest weight to Vodafone Group Plc (NASDAQ:VOD), around 1.51% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, designating 1.19 percent of its 13F equity portfolio to VOD.
Seeing as Vodafone Group Plc (NASDAQ:VOD) has faced bearish sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies that elected to cut their entire stakes by the end of the third quarter. Interestingly, Sander Gerber’s Hudson Bay Capital Management cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising about $21.1 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund dumped about $17.6 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Vodafone Group Plc (NASDAQ:VOD). These stocks are Intercontinental Exchange Inc (NYSE:ICE), JD.Com Inc (NASDAQ:JD), ABB Ltd (NYSE:ABB), and General Dynamics Corporation (NYSE:GD). This group of stocks’ market values match VOD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICE | 52 | 2712531 | 3 |
| JD | 63 | 6041314 | 3 |
| ABB | 10 | 372334 | -3 |
| GD | 46 | 6699253 | 4 |
| Average | 42.75 | 3956358 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.75 hedge funds with bullish positions and the average amount invested in these stocks was $3956 million. That figure was $759 million in VOD’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 10 bullish hedge fund positions. Vodafone Group Plc (NASDAQ:VOD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market by 3.1 percentage points. Unfortunately VOD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VOD investors were disappointed as the stock returned -22.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
