We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Sony Corporation (NYSE:SNE).
Sony Corporation (NYSE:SNE) investors should pay attention to a decrease in support from the world's most elite money managers recently. SNE was in 26 hedge funds' portfolios at the end of September. There were 35 hedge funds in our database with SNE holdings at the end of the previous quarter. Our calculations also showed that SNE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_221400" align="aligncenter" width="600"] Crispin Odey of Odey Asset Management Group[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to go over the key hedge fund action encompassing Sony Corporation (NYSE:SNE).
How are hedge funds trading Sony Corporation (NYSE:SNE)?
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in SNE over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GAMCO Investors held the most valuable stake in Sony Corporation (NYSE:SNE), which was worth $191.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $170.7 million worth of shares. Suvretta Capital Management, Third Point, and Odey Asset Management Group 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 Oasis Management allocated the biggest weight to Sony Corporation (NYSE:SNE), around 12.55% of its portfolio. Circle Road Advisors is also relatively very bullish on the stock, designating 6.45 percent of its 13F equity portfolio to SNE.
Judging by the fact that Sony Corporation (NYSE:SNE) has witnessed bearish sentiment from hedge fund managers, logic holds that there was a specific group of money managers that elected to cut their entire stakes last quarter. It's worth mentioning that Benjamin Pass's TOMS Capital dropped the largest position of all the hedgies followed by Insider Monkey, totaling close to $26.2 million in stock. Benjamin Pass's fund, TOMS Capital, also dumped its stock, about $26.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 9 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Sony Corporation (NYSE:SNE) but similarly valued. We will take a look at Ambev SA (NYSE:ABEV), The Estee Lauder Companies Inc (NYSE:EL), China Petroleum & Chemical Corp (NYSE:SNP), and Caterpillar Inc. (NYSE:CAT). This group of stocks' market valuations match SNE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABEV,18,384746,2 EL,43,1850698,7 SNP,13,178003,2 CAT,37,2758115,-8 Average,27.75,1292891,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $1293 million. That figure was $783 million in SNE's case. The Estee Lauder Companies Inc (NYSE:EL) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 13 bullish hedge fund positions. Sony Corporation (NYSE:SNE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on SNE, though not to the same extent, as the stock returned 7.4% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.