In this article you are going to find out whether hedge funds think TELUS Corporation (NYSE:TU) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
TELUS Corporation (NYSE:TU) was in 15 hedge funds' portfolios at the end of March. TU shareholders have witnessed an increase in enthusiasm from smart money of late. There were 13 hedge funds in our database with TU holdings at the end of the previous quarter. Our calculations also showed that TU isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 58 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.
[caption id="attachment_26397" align="aligncenter" width="392"] Ray Dalio of Bridgewater Associates[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, We take a look at lists like the 10 stocks that went up during the 2008 crash to identify the companies that are likely to deliver double digit returns in up and down markets. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to view the recent hedge fund action encompassing TELUS Corporation (NYSE:TU).
What does smart money think about TELUS Corporation (NYSE:TU)?
Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in TU a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in TELUS Corporation (NYSE:TU) was held by Renaissance Technologies, which reported holding $135.3 million worth of stock at the end of September. It was followed by Heathbridge Capital Management with a $23.7 million position. Other investors bullish on the company included GLG Partners, Citadel Investment Group, and Bridgewater Associates. In terms of the portfolio weights assigned to each position Heathbridge Capital Management allocated the biggest weight to TELUS Corporation (NYSE:TU), around 6.34% of its 13F portfolio. Unio Capital is also relatively very bullish on the stock, earmarking 0.16 percent of its 13F equity portfolio to TU.
As aggregate interest increased, specific money managers have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the largest position in TELUS Corporation (NYSE:TU). Two Sigma Advisors had $6.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $3.8 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Israel Englander's Millennium Management, and Donald Sussman's Paloma Partners.
Let's now take a look at hedge fund activity in other stocks similar to TELUS Corporation (NYSE:TU). We will take a look at Ulta Beauty, Inc. (NASDAQ:ULTA), The Liberty SiriusXM Group (NASDAQ:LSXMA), Loews Corporation (NYSE:L), and W.P. Carey Inc. (NYSE:WPC). All of these stocks' market caps are closest to TU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ULTA,46,925549,5 LSXMA,48,1087620,-2 L,21,107581,-3 WPC,22,33963,1 Average,34.25,538678,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $198 million in TU's case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand Loews Corporation (NYSE:L) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks TELUS Corporation (NYSE:TU) is even less popular than L. Hedge funds dodged a bullet by taking a bearish stance towards TU. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately TU wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); TU investors were disappointed as the stock returned 8.3% during the second quarter (through June 25th) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.