Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Telefonica S.A. (ADR) (NYSE:TEF) and see how the stock is affected by the recent hedge fund activity.
Is Telefonica S.A. (ADR) (NYSE:TEF) a buy right now? Money managers are reducing their bets on the stock. The number of bullish hedge fund positions retreated by 1 in recent months. TEF was in 5 hedge funds’ portfolios at the end of the third quarter of 2015. There were 6 hedge funds in our database with TEF positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as America Movil SAB de CV (ADR) (NYSE:AMX), Royal Bank of Scotland Group plc (ADR) (NYSE:RBS), and Express Scripts Holding Company (NASDAQ:ESRX) to gather more data points.
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In the 21st century investor’s toolkit there are a multitude of tools shareholders employ to assess their holdings. A couple of the most useful tools are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outpace their index-focused peers by a superb amount (see the details here).
With all of this in mind, we’re going to take a glance at the latest action encompassing Telefonica S.A. (ADR) (NYSE:TEF).
What does the smart money think about Telefonica S.A. (ADR) (NYSE:TEF)?
At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the second quarter. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Beddow Capital Management, managed by Ed Beddow and William Tichy, holds the biggest position in Telefonica S.A. (ADR) (NYSE:TEF). Beddow Capital Management has a $7.8 million position in the stock, comprising 3.3% of its 13F portfolio. The second largest stake is held by Matthew Hulsizer of PEAK6 Capital Management, with a $1.4 million call position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism contain Mario Gabelli’s GAMCO Investors, and Ken Griffin’s Citadel Investment Group.
Due to the fact that Telefonica S.A. (ADR) (NYSE:TEF) has experienced a declination in interest from the smart money, it’s easy to see that there were a few hedgies who sold off their entire stakes heading into Q4. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest position of the 700 funds watched by Insider Monkey, totaling about $3.1 million in stock, and William B. Gray’s Orbis Investment Management was right behind this move, as the fund sold off about $1.9 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Telefonica S.A. (ADR) (NYSE:TEF). We will take a look at America Movil SAB de CV (ADR) (NYSE:AMX), Royal Bank of Scotland Group plc (ADR) (NYSE:RBS), Express Scripts Holding Company (NASDAQ:ESRX), and Twenty-First Century Fox Inc (NASDAQ:FOX). This group of stocks’ market values are similar to TEF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMX | 12 | 239063 | -2 |
| RBS | 6 | 7977 | -7 |
| ESRX | 58 | 3434031 | -4 |
| FOX | 32 | 4222046 | -10 |
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $1976 million. That figure was $10 million in TEF’s case. Express Scripts Holding Company (NASDAQ:ESRX) is the most popular stock in this table. On the other hand Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Telefonica S.A. (ADR) (NYSE:TEF) is even less popular than RBS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
