U.S. Markets closed

Hedge Funds Dropped The Ball on Vodafone Group Plc (VOD)

Reymerlyn Martin

Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don't publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That's why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Vodafone Group Plc (NASDAQ:VOD) from the perspective of those elite funds.

Is Vodafone Group Plc (NASDAQ:VOD) a superb investment today? Investors who are in the know are getting less bullish. The number of bullish hedge fund bets were trimmed by 7 in recent months. Our calculations also showed that VOD isn't among the 30 most popular stocks among hedge funds (see the video below). VOD was in 11 hedge funds' portfolios at the end of June. There were 18 hedge funds in our database with VOD holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

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 review the latest hedge fund action regarding Vodafone Group Plc (NASDAQ:VOD).

What have hedge funds been doing with Vodafone Group Plc (NASDAQ:VOD)?

At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -39% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VOD over the last 16 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

VOD_oct2019

The largest stake in Vodafone Group Plc (NASDAQ:VOD) was held by Renaissance Technologies, which reported holding $386 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $48.8 million position. Other investors bullish on the company included Citadel Investment Group, Citadel Investment Group, and Two Sigma Advisors.

Seeing as Vodafone Group Plc (NASDAQ:VOD) has experienced falling interest from hedge fund managers, logic holds that there lies a certain "tier" of hedgies that elected to cut their entire stakes last quarter. Intriguingly, Jeffrey Talpins's Element Capital Management dropped the largest investment of the 750 funds followed by Insider Monkey, comprising close to $4 million in stock, and Matthew Tewksbury's Stevens Capital Management was right behind this move, as the fund said goodbye to about $1.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 7 funds last quarter.

Let's check out hedge fund activity in other stocks similar to Vodafone Group Plc (NASDAQ:VOD). We will take a look at ING Groep N.V. (NYSE:ING), Target Corporation (NYSE:TGT), Banco de Chile (NYSE:BCH), and American Electric Power Company, Inc. (NYSE:AEP). This group of stocks' market values are closest to VOD's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ING,8,429564,-2 TGT,37,1228358,-13 BCH,6,79128,2 AEP,27,1483356,-8 Average,19.5,805102,-5.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $805 million. That figure was $448 million in VOD's case. Target Corporation (NYSE:TGT) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 6 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. Our calculations showed that top 20 most popular stocks 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 VOD as the stock returned 21.9% during the same time frame and outperformed the market by an even larger margin.

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

Related Content