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. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG).
Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) shares haven't seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds' portfolios at the end of the fourth quarter of 2019. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Uber Technologies, Inc. (NYSE:UBER), Norfolk Southern Corp. (NYSE:NSC), and Suncor Energy Inc. (NYSE:SU) to gather more data points. Our calculations also showed that SMFG 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 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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26335" align="aligncenter" width="400"] Ken Fisher of Fisher Asset Management[/caption]
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. Keeping this in mind we're going to take a peek at the new hedge fund action encompassing Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG).
Hedge fund activity in Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG)
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in SMFG over the last 18 quarters. 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 Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) was held by Fisher Asset Management, which reported holding $460.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $61.9 million position. Other investors bullish on the company included LMR Partners, D E Shaw, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position LMR Partners allocated the biggest weight to Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), around 2.28% of its 13F portfolio. Fisher Asset Management is also relatively very bullish on the stock, setting aside 0.47 percent of its 13F equity portfolio to SMFG.
Due to the fact that Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) has witnessed a decline in interest from the smart money, we can see that there exists a select few hedge funds who were dropping their entire stakes in the third quarter. Intriguingly, Gavin Saitowitz and Cisco J. del Valle's Springbok Capital said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, worth about $1.3 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund sold off about $0.1 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) but similarly valued. These stocks are Uber Technologies, Inc. (NYSE:UBER), Norfolk Southern Corp. (NYSE:NSC), Suncor Energy Inc. (NYSE:SU), and HCA Healthcare Inc (NYSE:HCA). This group of stocks' market caps resemble SMFG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBER,94,6677417,46 NSC,52,1931031,2 SU,39,1487356,-2 HCA,63,3585533,3 Average,62,3420334,12.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 62 hedge funds with bullish positions and the average amount invested in these stocks was $3420 million. That figure was $584 million in SMFG's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Suncor Energy Inc. (NYSE:SU) is the least popular one with only 39 bullish hedge fund positions. Compared to these stocks Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is even less popular than SU. Hedge funds dodged a bullet by taking a bearish stance towards SMFG. 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 SMFG wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SMFG investors were disappointed as the stock returned -25.4% 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.