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Did Hedge Funds Drop The Ball On Turkcell Iletisim Hizmetleri A.S. (TKC) ?

Nina Todic

How do we determine whether Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds' portfolios at the end of June. At the end of this article we will also compare TKC to other stocks including Crane Co. (NYSE:CR), Deckers Outdoor Corporation (NYSE:DECK), and GW Pharmaceuticals plc (NASDAQ:GWPH) to get a better sense of its popularity.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.

John Overdeck of Two Sigma

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to view the recent hedge fund action encompassing Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC).

Hedge fund activity in Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC)

At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in TKC a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with TKC Positions

According to Insider Monkey's hedge fund database, Alden Global Capital, managed by Randall Smith, holds the biggest position in Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC). Alden Global Capital has a $3.7 million position in the stock, comprising 5.7% of its 13F portfolio. The second largest stake is held by D E Shaw, led by D. E. Shaw, holding a $3.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism encompass John Overdeck and David Siegel's Two Sigma Advisors, Ken Griffin's Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

Since Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) has experienced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few fund managers that elected to cut their full holdings heading into Q3. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP cut the largest stake of the "upper crust" of funds followed by Insider Monkey, comprising close to $0.5 million in stock, and Jim Simons's Renaissance Technologies was right behind this move, as the fund said goodbye to about $0.3 million worth. These moves are intriguing to say the least, as aggregate 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 - not necessarily in the same industry as Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) but similarly valued. We will take a look at Crane Co. (NYSE:CR), Deckers Outdoor Corporation (NYSE:DECK), GW Pharmaceuticals plc (NASDAQ:GWPH), and Sinclair Broadcast Group, Inc. (NASDAQ:SBGI). This group of stocks' market valuations are similar to TKC's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CR,26,366248,4 DECK,25,610746,-4 GWPH,16,442454,-7 SBGI,36,584117,8 Average,25.75,500891,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $501 million. That figure was $8 million in TKC's case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand GW Pharmaceuticals plc (NASDAQ:GWPH) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is even less popular than GWPH. Our calculations showed that top 20 most popular stocks (view the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on TKC, though not to the same extent, as the stock returned 5.5% during the third quarter and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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