At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Sony Corporation (NYSE:SNE) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Hedge fund interest in Sony Corporation (NYSE:SNE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SNE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare SNE to other stocks including HDFC Bank Limited (NYSE:HDB), Fidelity National Information Services Inc. (NYSE:FIS), and BlackRock, Inc. (NYSE:BLK) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Bruce Kovner of Caxton Associates LP
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a peek at the latest hedge fund action encompassing Sony Corporation (NYSE:SNE).
How have hedgies been trading Sony Corporation (NYSE:SNE)?
At the end of June, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SNE over the last 20 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Soroban Capital Partners was the largest shareholder of Sony Corporation (NYSE:SNE), with a stake worth $178.7 million reported as of the end of September. Trailing Soroban Capital Partners was GAMCO Investors, which amassed a stake valued at $167.7 million. Soroban Capital Partners, Point72 Asset Management, and Citadel Investment Group 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 MD Sass allocated the biggest weight to Sony Corporation (NYSE:SNE), around 6.28% of its 13F portfolio. Alight Capital is also relatively very bullish on the stock, earmarking 5.13 percent of its 13F equity portfolio to SNE.
Seeing as Sony Corporation (NYSE:SNE) has faced a decline in interest from the smart money, logic holds that there exists a select few funds that elected to cut their positions entirely by the end of the second quarter. It’s worth mentioning that Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners dropped the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $42.1 million in stock. Dan Loeb’s fund, Third Point, also dropped its stock, about $39.9 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Sony Corporation (NYSE:SNE). These stocks are HDFC Bank Limited (NYSE:HDB), Fidelity National Information Services Inc. (NYSE:FIS), BlackRock, Inc. (NYSE:BLK), Toronto-Dominion Bank (NYSE:TD), S&P Global Inc. (NYSE:SPGI), BP plc (NYSE:BP), and Diageo plc (NYSE:DEO). This group of stocks’ market values match SNE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HDB | 42 | 1177218 | 4 |
| FIS | 111 | 8173639 | 6 |
| BLK | 37 | 702091 | -1 |
| TD | 15 | 155444 | -4 |
| SPGI | 71 | 3024689 | -2 |
| BP | 27 | 736756 | -4 |
| DEO | 20 | 653839 | 3 |
| Average | 46.1 | 2089097 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.1 hedge funds with bullish positions and the average amount invested in these stocks was $2089 million. That figure was $599 million in SNE’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand Toronto-Dominion Bank (NYSE:TD) is the least popular one with only 15 bullish hedge fund positions. Sony Corporation (NYSE:SNE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SNE is 35.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on SNE as the stock returned 11.8% since the end of June (through September 25th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
