Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards 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 the fourth quarter of 2019. There were 27 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 Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are perceived as worthless, old financial tools of the past. While there are greater than 8000 funds with their doors open today, Our researchers hone in on the top tier of this group, around 850 funds. Most estimates calculate that this group of people manage most of the hedge fund industry's total asset base, and by keeping an eye on their unrivaled equity investments, Insider Monkey has identified many investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let's take a peek at the new hedge fund action surrounding Sony Corporation (NYSE:SNE).
Hedge fund activity in Sony Corporation (NYSE:SNE)
Heading into the first quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in SNE over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the number one position in Sony Corporation (NYSE:SNE). GAMCO Investors has a $214.8 million position in the stock, comprising 1.7% of its 13F portfolio. Coming in second is Suvretta Capital Management, led by Aaron Cowen, holding a $157.8 million position; the fund has 3.6% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism encompass Dan Loeb's Third Point, Renaissance Technologies and Crispin Odey's Odey Asset Management Group. In terms of the portfolio weights assigned to each position Anavon Capital allocated the biggest weight to Sony Corporation (NYSE:SNE), around 13.05% of its 13F portfolio. Circle Road Advisors is also relatively very bullish on the stock, setting aside 9.35 percent of its 13F equity portfolio to SNE.
Since Sony Corporation (NYSE:SNE) has experienced declining sentiment from hedge fund managers, logic holds that there was a specific group of fund managers that slashed their full holdings in the third quarter. At the top of the heap, Seth Fischer's Oasis Management cut the biggest position of the 750 funds tracked by Insider Monkey, comprising an estimated $19.7 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners was right behind this move, as the fund said goodbye to about $13.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let's now review hedge fund activity in other stocks similar to Sony Corporation (NYSE:SNE). We will take a look at Morgan Stanley (NYSE:MS), Gilead Sciences, Inc. (NASDAQ:GILD), Caterpillar Inc. (NYSE:CAT), and Goldman Sachs Group, Inc. (NYSE:GS). All of these stocks' market caps are similar to SNE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MS,60,3846065,-8 GILD,67,3722904,1 CAT,52,3227642,13 GS,75,7581397,-3 Average,63.5,4594502,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 63.5 hedge funds with bullish positions and the average amount invested in these stocks was $4595 million. That figure was $762 million in SNE's case. Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Caterpillar Inc. (NYSE:CAT) is the least popular one with only 52 bullish hedge fund positions. Compared to these stocks Sony Corporation (NYSE:SNE) is even less popular than CAT. Hedge funds dodged a bullet by taking a bearish stance towards SNE. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately SNE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SNE investors were disappointed as the stock returned -15% during the same time period and underperformed 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 most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.