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How Did T-Mobile US, Inc. (TMUS) Compare Against Top Hedge Fund Stocks in 2019?

Abigail Fisher

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by almost 14 percentage points. That's a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is T-Mobile US, Inc. (NASDAQ:TMUS) a buy here? The best stock pickers are taking a pessimistic view. The number of bullish hedge fund positions went down by 18 lately. Our calculations also showed that TMUS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_30633" align="aligncenter" width="474"] Alan Fournier of Pennant Capital Management[/caption]

PENNANT CAPITAL MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we're going to check out the latest hedge fund action regarding T-Mobile US, Inc. (NASDAQ:TMUS).

How are hedge funds trading T-Mobile US, Inc. (NASDAQ:TMUS)?

At the end of the third quarter, a total of 60 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TMUS over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Maverick Capital, managed by Lee Ainslie, holds the biggest position in T-Mobile US, Inc. (NASDAQ:TMUS). Maverick Capital has a $292.8 million position in the stock, comprising 4.3% of its 13F portfolio. The second most bullish fund manager is Glenview Capital, managed by Larry Robbins, which holds a $112 million position; 1.2% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism comprise Ken Griffin's Citadel Investment Group, Cliff Asness's AQR Capital Management and Keith Meister's Corvex Capital. In terms of the portfolio weights assigned to each position Tekne Capital Management allocated the biggest weight to T-Mobile US, Inc. (NASDAQ:TMUS), around 12.54% of its 13F portfolio. Asturias Capital is also relatively very bullish on the stock, earmarking 11.6 percent of its 13F equity portfolio to TMUS.

Seeing as T-Mobile US, Inc. (NASDAQ:TMUS) has faced bearish sentiment from hedge fund managers, we can see that there exists a select few fund managers who were dropping their full holdings last quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the largest investment of all the hedgies tracked by Insider Monkey, worth an estimated $136.9 million in stock. Andrew Immerman and Jeremy Schiffman's fund, Palestra Capital Management, also dropped its stock, about $105.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 18 funds last quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as T-Mobile US, Inc. (NASDAQ:TMUS) but similarly valued. These stocks are Banco Santander, S.A. (NYSE:SAN), Mitsubishi UFJ Financial Group Inc (NYSE:MUFG), Banco Bradesco SA (NYSE:BBD), and China Life Insurance Company Ltd. (NYSE:LFC). All of these stocks' market caps are closest to TMUS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAN,20,645984,-2 MUFG,10,60064,-2 BBD,16,595049,2 LFC,8,34563,0 Average,13.5,333915,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $1457 million in TMUS's case. Banco Santander, S.A. (NYSE:SAN) is the most popular stock in this table. On the other hand China Life Insurance Company Ltd. (NYSE:LFC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks T-Mobile US, Inc. (NASDAQ:TMUS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately TMUS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TMUS were disappointed as the stock returned 21% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019. 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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