Was The Smart Money Right About AT&T Inc. (T)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 873 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article we look at what those investors think of AT&T Inc. (NYSE:T).

AT&T Inc. (NYSE:T) has experienced an increase in enthusiasm from smart money lately. AT&T Inc. (NYSE:T) was in 68 hedge funds’ portfolios at the end of June. 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 Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Petry of Sessa Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. We go through lists like the 10 best EV stocks to pick the next Tesla 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. Now we’re going to take a glance at the recent hedge fund action regarding AT&T Inc. (NYSE:T).

Do Hedge Funds Think T Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 68 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards T over the last 24 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

The largest stake in AT&T Inc. (NYSE:T) was held by Citadel Investment Group, which reported holding $942.6 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $315.3 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Sessa Capital. In terms of the portfolio weights assigned to each position Zeno Research allocated the biggest weight to AT&T Inc. (NYSE:T), around 10.11% of its 13F portfolio. Sessa Capital is also relatively very bullish on the stock, setting aside 7.45 percent of its 13F equity portfolio to T.

Consequently, key hedge funds have been driving this bullishness. Sessa Capital, managed by John Petry, created the most outsized call position in AT&T Inc. (NYSE:T). Sessa Capital had $198.6 million invested in the company at the end of the quarter. John Petry’s Sessa Capital also made a $60 million investment in the stock during the quarter. The following funds were also among the new T investors: Michael Gelband’s ExodusPoint Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Stuart J. Zimmer’s Zimmer Partners.

Let’s now review hedge fund activity in other stocks similar to AT&T Inc. (NYSE:T). We will take a look at Novartis AG (NYSE:NVS), PepsiCo, Inc. (NASDAQ:PEP), Chevron Corporation (NYSE:CVX), AbbVie Inc (NYSE:ABBV), Thermo Fisher Scientific Inc. (NYSE:TMO), Merck & Co., Inc. (NYSE:MRK), and Broadcom Inc (NASDAQ:AVGO). All of these stocks’ market caps are closest to T’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 61.9 hedge funds with bullish positions and the average amount invested in these stocks was $4619 million. That figure was $2896 million in T’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 22 bullish hedge fund positions. AT&T Inc. (NYSE:T) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for T is 67.1. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and beat the market again by 2.3 percentage points. Unfortunately T wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on T were disappointed as the stock returned -8.9% since the end of June (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.