Is TELUS Corporation (NYSE:TU) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is TELUS Corporation (NYSE:TU) going to take off soon? Investors who are in the know are betting on the stock. The number of long hedge fund bets increased by 2 in recent months. Our calculations also showed that TU isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman, GLG Partners[/caption]
Let's review the new hedge fund action encompassing TELUS Corporation (NYSE:TU).
Hedge fund activity in TELUS Corporation (NYSE:TU)
Heading into the second quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TU over the last 15 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.
Among these funds, Renaissance Technologies held the most valuable stake in TELUS Corporation (NYSE:TU), which was worth $210.2 million at the end of the first quarter. On the second spot was GLG Partners which amassed $35.9 million worth of shares. Moreover, D E Shaw, Arrowstreet Capital, and Millennium Management were also bullish on TELUS Corporation (NYSE:TU), allocating a large percentage of their portfolios to this stock.
Consequently, key hedge funds have been driving this bullishness. PDT Partners, managed by Peter Muller, created the most outsized position in TELUS Corporation (NYSE:TU). PDT Partners had $1.6 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also made a $0.8 million investment in the stock during the quarter. The following funds were also among the new TU investors: Dmitry Balyasny's Balyasny Asset Management and George Zweig, Shane Haas and Ravi Chander's Signition LP.
Let's also examine hedge fund activity in other stocks similar to TELUS Corporation (NYSE:TU). We will take a look at Parker-Hannifin Corporation (NYSE:PH), FirstEnergy Corp. (NYSE:FE), Centene Corp (NYSE:CNC), and Verisk Analytics, Inc. (NASDAQ:VRSK). All of these stocks' market caps match TU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PH,28,516590,-2 FE,41,3727862,2 CNC,58,2067914,2 VRSK,20,494091,-10 Average,36.75,1701614,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $1702 million. That figure was $336 million in TU's case. Centene Corp (NYSE:CNC) is the most popular stock in this table. On the other hand Verisk Analytics, Inc. (NASDAQ:VRSK) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks TELUS Corporation (NYSE:TU) is even less popular than VRSK. Hedge funds dodged a bullet by taking a bearish stance towards TU. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately TU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TU investors were disappointed as the stock returned 0.2% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.