We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Vodafone Group Plc (NASDAQ:VOD).
Vodafone Group Plc (NASDAQ:VOD) was in 16 hedge funds’ portfolios at the end of December. VOD has seen a decrease in hedge fund interest of late. There were 20 hedge funds in our database with VOD positions at the end of the previous quarter. Our calculations also showed that VOD 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.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind let’s review the recent hedge fund action regarding Vodafone Group Plc (NASDAQ:VOD).
What have hedge funds been doing with Vodafone Group Plc (NASDAQ:VOD)?
Heading into the first quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VOD over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Vodafone Group Plc (NASDAQ:VOD), which was worth $656.7 million at the end of the third quarter. On the second spot was Levin Easterly Partners which amassed $42.4 million worth of shares. Segantii Capital, Citadel Investment Group, 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 Segantii Capital allocated the biggest weight to Vodafone Group Plc (NASDAQ:VOD), around 1.51% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, dishing out 1.19 percent of its 13F equity portfolio to VOD.
Due to the fact that Vodafone Group Plc (NASDAQ:VOD) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies that slashed their full holdings by the end of the third quarter. Interestingly, Sander Gerber’s Hudson Bay Capital Management dumped the biggest investment of all the hedgies followed by Insider Monkey, worth close to $21.1 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund said goodbye to about $17.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Vodafone Group Plc (NASDAQ:VOD). These stocks are Intercontinental Exchange Inc (NYSE:ICE), JD.Com Inc (NASDAQ:JD), ABB Ltd (NYSE:ABB), and General Dynamics Corporation (NYSE:GD). This group of stocks’ market valuations resemble VOD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICE | 52 | 2712531 | 3 |
| JD | 63 | 6041314 | 3 |
| ABB | 10 | 372334 | -3 |
| GD | 46 | 6699253 | 4 |
| Average | 42.75 | 3956358 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.75 hedge funds with bullish positions and the average amount invested in these stocks was $3956 million. That figure was $759 million in VOD’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 10 bullish hedge fund positions. Vodafone Group Plc (NASDAQ:VOD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately VOD wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); VOD investors were disappointed as the stock returned -29.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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.
