Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG) changed recently.
Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG) has seen a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that MUFG isn't among the 30 most popular stocks among hedge funds (see the video at the end of this article).
At the moment there are plenty of tools stock market investors use to appraise stocks. A pair of the most useful tools are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can beat the market by a significant margin (see the details here).
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 take a look at the recent hedge fund action surrounding Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG).
How have hedgies been trading Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG)?
At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MUFG over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, LMR Partners was the largest shareholder of Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG), with a stake worth $29.7 million reported as of the end of March. Trailing LMR Partners was Renaissance Technologies, which amassed a stake valued at $15.8 million. Fisher Asset Management, D E Shaw, and Bailard Inc were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedgies that decided to sell off their full holdings in the second quarter. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP dropped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, comprising an estimated $3.2 million in stock, and Michael Platt and William Reeves's BlueCrest Capital Mgmt. was right behind this move, as the fund dropped about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds in the second quarter.
Let's also examine hedge fund activity in other stocks similar to Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG). These stocks are CIGNA Corporation (NYSE:CI), Intuitive Surgical, Inc. (NASDAQ:ISRG), Boston Scientific Corporation (NYSE:BSX), and Eni SpA (NYSE:E). All of these stocks' market caps are similar to MUFG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CI,48,2664032,1 ISRG,37,994131,-3 BSX,50,2980786,3 E,5,79240,-4 Average,35,1679547,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1680 million. That figure was $65 million in MUFG's case. Boston Scientific Corporation (NYSE:BSX) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 5 bullish hedge fund positions. Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG) 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 MUFG as the stock returned 6.9% during the same time frame and outperformed the market by an even larger margin. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.