It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like China Mobile Limited (NYSE:CHL).
China Mobile Limited (NYSE:CHL) investors should pay attention to a decrease in hedge fund interest of late. Our calculations also showed that CHL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are several tools stock market investors can use to value their stock investments. Some of the most underrated tools are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can beat the broader indices by a superb margin (see the details here).
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the fresh hedge fund action surrounding China Mobile Limited (NYSE:CHL).
How have hedgies been trading China Mobile Limited (NYSE:CHL)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHL over the last 17 quarters. So, let’s find out 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 China Mobile Limited (NYSE:CHL), with a stake worth $244.3 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $71.4 million. Ariel Investments, Two Sigma Advisors, 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 Ariel Investments allocated the biggest weight to China Mobile Limited (NYSE:CHL), around 0.59% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.21 percent of its 13F equity portfolio to CHL.
Since China Mobile Limited (NYSE:CHL) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies that decided to sell off their full holdings last quarter. Interestingly, Charles Clough’s Clough Capital Partners said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $1.9 million in stock. Noam Gottesman’s fund, GLG Partners, also dropped its stock, about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as China Mobile Limited (NYSE:CHL) but similarly valued. We will take a look at McDonald’s Corporation (NYSE:MCD), Unilever plc (NYSE:UL), Unilever N.V. (NYSE:UN), and Citigroup Inc. (NYSE:C). This group of stocks’ market valuations are closest to CHL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MCD | 49 | 2075982 | -3 |
| UL | 14 | 337374 | 4 |
| UN | 15 | 1157802 | -1 |
| C | 94 | 10270591 | 11 |
| Average | 43 | 3460437 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $3460 million. That figure was $386 million in CHL’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand Unilever plc (NYSE:UL) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks China Mobile Limited (NYSE:CHL) is even less popular than UL. Hedge funds dodged a bullet by taking a bearish stance towards CHL. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CHL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CHL investors were disappointed as the stock returned -8.9% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
