We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of TIM Participacoes SA (NYSE:TSU).
TIM Participacoes SA (NYSE:TSU) was in 11 hedge funds' portfolios at the end of December. TSU shareholders have witnessed a decrease in hedge fund sentiment of late. There were 14 hedge funds in our database with TSU holdings at the end of the previous quarter. Our calculations also showed that TSU isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_338854" align="aligncenter" width="399"] Steven Tananbaum of GoldenTree Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to take a look at the key hedge fund action surrounding TIM Participacoes SA (NYSE:TSU).
How have hedgies been trading TIM Participacoes SA (NYSE:TSU)?
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 -21% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TSU over the last 18 quarters. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in TIM Participacoes SA (NYSE:TSU), which was worth $142.7 million at the end of the third quarter. On the second spot was Paulson & Co which amassed $71.1 million worth of shares. Renaissance Technologies, GoldenTree Asset Management, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position GoldenTree Asset Management allocated the biggest weight to TIM Participacoes SA (NYSE:TSU), around 5.63% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, earmarking 1.53 percent of its 13F equity portfolio to TSU.
Since TIM Participacoes SA (NYSE:TSU) has experienced bearish sentiment from hedge fund managers, logic holds that there was a specific group of fund managers who were dropping their entire stakes by the end of the third quarter. Intriguingly, Ken Griffin's Citadel Investment Group sold off the largest position of the 750 funds followed by Insider Monkey, totaling an estimated $2.3 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also cut its stock, about $1.7 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as TIM Participacoes SA (NYSE:TSU) but similarly valued. We will take a look at Gaming and Leisure Properties Inc (NASDAQ:GLPI), ICON Public Limited Company (NASDAQ:ICLR), Hyatt Hotels Corporation (NYSE:H), and National Retail Properties, Inc. (NYSE:NNN). This group of stocks' market caps are closest to TSU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GLPI,29,851239,-6 ICLR,19,646835,-5 H,27,1152600,-4 NNN,23,276082,2 Average,24.5,731689,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $732 million. That figure was $352 million in TSU's case. Gaming and Leisure Properties Inc (NASDAQ:GLPI) is the most popular stock in this table. On the other hand ICON Public Limited Company (NASDAQ:ICLR) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks TIM Participacoes SA (NYSE:TSU) is even less popular than ICLR. Hedge funds dodged a bullet by taking a bearish stance towards TSU. 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 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately TSU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TSU investors were disappointed as the stock returned -31.9% 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. 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.