Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Chunghwa Telecom Co., Ltd (NYSE:CHT).
Chunghwa Telecom Co., Ltd (NYSE:CHT) investors should pay attention to an increase in hedge fund sentiment in recent months. Chunghwa Telecom Co., Ltd (NYSE:CHT) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 10. There were 4 hedge funds in our database with CHT holdings at the end of June. Our calculations also showed that CHT isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
If you’d ask most stock holders, hedge funds are viewed as unimportant, old investment tools of the past. While there are greater than 8000 funds with their doors open today, Our researchers hone in on the leaders of this club, around 850 funds. It is estimated that this group of investors oversee the majority of all hedge funds’ total asset base, and by observing their highest performing stock picks, Insider Monkey has unearthed several 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 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a peek at the latest hedge fund action surrounding Chunghwa Telecom Co., Ltd (NYSE:CHT).
Hedge fund activity in Chunghwa Telecom Co., Ltd (NYSE:CHT)
At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in CHT a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Chunghwa Telecom Co., Ltd (NYSE:CHT) was held by Renaissance Technologies, which reported holding $142.2 million worth of stock at the end of September. It was followed by Millennium Management with a $3 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and Ovata Capital Management. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Chunghwa Telecom Co., Ltd (NYSE:CHT), around 0.14% of its 13F portfolio. Ovata Capital Management is also relatively very bullish on the stock, dishing out 0.08 percent of its 13F equity portfolio to CHT.
As one would reasonably expect, key money managers have jumped into Chunghwa Telecom Co., Ltd (NYSE:CHT) headfirst. Millennium Management, managed by Israel Englander, initiated the most valuable position in Chunghwa Telecom Co., Ltd (NYSE:CHT). Millennium Management had $3 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $2.9 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Chunghwa Telecom Co., Ltd (NYSE:CHT) but similarly valued. These stocks are ANSYS, Inc. (NASDAQ:ANSS), Moderna, Inc. (NASDAQ:MRNA), Kinder Morgan Inc (NYSE:KMI), Alcon Inc. (NYSE:ALC), Public Service Enterprise Group Incorporated (NYSE:PEG), Wayfair Inc (NYSE:W), and Eni SpA (NYSE:E). All of these stocks’ market caps resemble CHT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ANSS | 40 | 1456264 | 0 |
| MRNA | 32 | 690338 | -5 |
| KMI | 46 | 939696 | -4 |
| ALC | 26 | 676140 | 5 |
| PEG | 23 | 406385 | -8 |
| W | 40 | 4956036 | -1 |
| E | 5 | 21869 | -3 |
| Average | 30.3 | 1306675 | -2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $1307 million. That figure was $149 million in CHT’s case. Kinder Morgan Inc (NYSE:KMI) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Chunghwa Telecom Co., Ltd (NYSE:CHT) is even less popular than E. Our overall hedge fund sentiment score for CHT is 21. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards CHT. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately CHT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CHT investors were disappointed as the stock returned 6% since the end of the third quarter (through 11/27) 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 so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
