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 Telefonica S.A. (NYSE:TEF) to find out whether there were any major changes in hedge funds’ views.
Is Telefonica S.A. (NYSE:TEF) a good stock to buy now? Prominent investors were in a bearish mood. The number of long hedge fund bets decreased by 1 in recent months. Telefonica S.A. (NYSE:TEF) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 10. Our calculations also showed that TEF 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). There were 6 hedge funds in our database with TEF positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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Dmitry Balyasny of Balyasny Asset Management
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. Keeping this in mind we’re going to check out the recent hedge fund action surrounding Telefonica S.A. (NYSE:TEF).
How are hedge funds trading Telefonica S.A. (NYSE:TEF)?
At third quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in TEF over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in Telefonica S.A. (NYSE:TEF). Arrowstreet Capital has a $5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $0.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism comprise Paul Marshall and Ian Wace’s Marshall Wace LLP, John Overdeck and David Siegel’s Two Sigma Advisors and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Arrowstreet Capital allocated the biggest weight to Telefonica S.A. (NYSE:TEF), around 0.01% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to TEF.
Judging by the fact that Telefonica S.A. (NYSE:TEF) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedge funds who were dropping their full holdings heading into Q4. At the top of the heap, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors said goodbye to the largest investment of all the hedgies watched by Insider Monkey, worth an estimated $0.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Telefonica S.A. (NYSE:TEF) but similarly valued. We will take a look at EPAM Systems Inc (NYSE:EPAM), Maxim Integrated Products Inc. (NASDAQ:MXIM), Akamai Technologies, Inc. (NASDAQ:AKAM), The Cooper Companies, Inc. (NYSE:COO), Vulcan Materials Company (NYSE:VMC), Palantir Technologies Inc. (NYSE:PLTR), and Rollins, Inc. (NYSE:ROL). This group of stocks’ market valuations match TEF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EPAM | 33 | 574847 | 5 |
| MXIM | 52 | 1964354 | 19 |
| AKAM | 40 | 441271 | 0 |
| COO | 30 | 1218371 | -4 |
| VMC | 42 | 1331465 | -9 |
| PLTR | 31 | 643387 | 31 |
| ROL | 29 | 673189 | 0 |
| Average | 36.7 | 978126 | 6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.7 hedge funds with bullish positions and the average amount invested in these stocks was $978 million. That figure was $7 million in TEF’s case. Maxim Integrated Products Inc. (NASDAQ:MXIM) is the most popular stock in this table. On the other hand Rollins, Inc. (NYSE:ROL) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Telefonica S.A. (NYSE:TEF) is even less popular than ROL. Our overall hedge fund sentiment score for TEF is 19. 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 clearly dropped the ball on TEF as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on TEF as the stock returned 30.8% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
