Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards AT&T Inc. (NYSE:T) to find out whether there were any major changes in hedge funds’ views.
Is T stock a buy or sell? AT&T Inc. (NYSE:T) has seen an increase in enthusiasm from smart money of late. AT&T Inc. (NYSE:T) was in 58 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 94. Our calculations also showed that T isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
Paul Singer of Elliott Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. 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 homepage (or at the end of this article). Keeping this in mind we’re going to take a look at the key hedge fund action regarding AT&T Inc. (NYSE:T).
Do Hedge Funds Think T Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. By comparison, 50 hedge funds held shares or bullish call options in T a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, D. E. Shaw’s D E Shaw has the number one position in AT&T Inc. (NYSE:T), worth close to $193.5 million, accounting for 0.2% of its total 13F portfolio. On D E Shaw’s heels is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $192.3 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Paul Singer’s Elliott Investment Management, Cliff Asness’s AQR Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Kingstown Capital Management allocated the biggest weight to AT&T Inc. (NYSE:T), around 3.9% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, designating 3.54 percent of its 13F equity portfolio to T.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Elliott Investment Management, managed by Paul Singer, established the most outsized position in AT&T Inc. (NYSE:T). Elliott Investment Management had $143.8 million invested in the company at the end of the quarter. Andrew Kurita’s Kettle Hill Capital Management also made a $17.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Nicholas Bagnall’s Te Ahumairangi Investment Management, Leonard Green’s Leonard Green & Partners, and Michael Blitzer’s Kingstown Capital Management.
Let’s go over hedge fund activity in other stocks similar to AT&T Inc. (NYSE:T). We will take a look at Pfizer Inc. (NYSE:PFE), salesforce.com, inc. (NYSE:CRM), Intel Corporation (NASDAQ:INTC), Abbott Laboratories (NYSE:ABT), Oracle Corporation (NASDAQ:ORCL), AbbVie Inc (NYSE:ABBV), and Cisco Systems, Inc. (NASDAQ:CSCO). This group of stocks’ market caps match T’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFE | 63 | 1848417 | -3 |
| CRM | 97 | 10576035 | -9 |
| INTC | 72 | 5578824 | 6 |
| ABT | 64 | 4303482 | 2 |
| ORCL | 52 | 2450210 | -4 |
| ABBV | 83 | 6965013 | 1 |
| CSCO | 60 | 4974309 | 1 |
| Average | 70.1 | 5242327 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 70.1 hedge funds with bullish positions and the average amount invested in these stocks was $5242 million. That figure was $1045 million in T’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Oracle Corporation (NASDAQ:ORCL) is the least popular one with only 52 bullish hedge fund positions. AT&T Inc. (NYSE:T) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for T is 35.2. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. A small number of hedge funds were also right about betting on T as the stock returned 5.3% since the end of the fourth quarter (through 3/19) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
