Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider T-Mobile US, Inc. (NYSE:TMUS) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
T-Mobile US, Inc. (NYSE:TMUS) investors should be aware of a decrease in enthusiasm from smart money in recent months. Our calculations also showed that TMUS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Lee Ainslie of Maverick Capital
We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. Federal Reserve and Central Banks all around world are printing money like there is no tomorrow, so we check out this this precious metals expert’s stock pick. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the key hedge fund action regarding T-Mobile US, Inc. (NYSE:TMUS).
What does smart money think about T-Mobile US, Inc. (NYSE:TMUS)?
Heading into the first quarter of 2020, a total of 61 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the third quarter of 2019. By comparison, 75 hedge funds held shares or bullish call options in TMUS a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in T-Mobile US, Inc. (NYSE:TMUS) was held by Maverick Capital, which reported holding $207.3 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $170.5 million position. Other investors bullish on the company included Glenview Capital, D E Shaw, and NWI Management. In terms of the portfolio weights assigned to each position Tekne Capital Management allocated the biggest weight to T-Mobile US, Inc. (NYSE:TMUS), around 14.16% of its 13F portfolio. Discovery Capital Management is also relatively very bullish on the stock, designating 9.11 percent of its 13F equity portfolio to TMUS.
Judging by the fact that T-Mobile US, Inc. (NYSE:TMUS) has faced declining sentiment from hedge fund managers, it’s easy to see that there were a few hedgies who sold off their positions entirely by the end of the third quarter. Interestingly, Robert Boucai’s Newbrook Capital Advisors sold off the biggest position of all the hedgies watched by Insider Monkey, totaling close to $48.1 million in stock. Matthew Mark’s fund, Jet Capital Investors, also said goodbye to its stock, about $27.9 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as T-Mobile US, Inc. (NYSE:TMUS) but similarly valued. We will take a look at The Southern Company (NYSE:SO), S&P Global Inc. (NYSE:SPGI), Duke Energy Corporation (NYSE:DUK), and Equinor ASA (NYSE:EQNR). This group of stocks’ market values match TMUS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SO | 30 | 866429 | -3 |
| SPGI | 76 | 3764961 | 1 |
| DUK | 37 | 1534613 | 5 |
| EQNR | 14 | 424786 | -1 |
| Average | 39.25 | 1647697 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.25 hedge funds with bullish positions and the average amount invested in these stocks was $1648 million. That figure was $1397 million in TMUS’s case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 14 bullish hedge fund positions. T-Mobile US, Inc. (NYSE:TMUS) is not the most popular stock in this group but hedge fund interest is still above average. 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 lost 1.0% in 2020 through April 20th but still beat the market by 11 percentage points. Hedge funds were also right about betting on TMUS as the stock returned 14.7% in 2020 (through April 20th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
