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Hedge Funds Never Been Less Bullish On SK Telecom Co., Ltd. (SKM)

·6 min read

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding SK Telecom Co., Ltd. (NYSE:SKM).

Is SK Telecom Co., Ltd. (NYSE:SKM) a sound investment now? The smart money was getting less bullish. The number of bullish hedge fund bets decreased by 4 lately. SK Telecom Co., Ltd. (NYSE:SKM) was in 4 hedge funds' portfolios at the end of September. The all time high for this statistics is 13. Our calculations also showed that SKM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are a lot of gauges investors have at their disposal to grade stocks. Two of the most under-the-radar gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the top money managers can trounce the broader indices by a healthy margin (see the details here).

Ian Wace Marshall Wace
Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to take a glance at the key hedge fund action surrounding SK Telecom Co., Ltd. (NYSE:SKM).

What does smart money think about SK Telecom Co., Ltd. (NYSE:SKM)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SKM over the last 21 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.

Of the funds tracked by Insider Monkey, Oldfield Partners, managed by Richard Oldfield, holds the largest position in SK Telecom Co., Ltd. (NYSE:SKM). Oldfield Partners has a $61.4 million position in the stock, comprising 6.6% of its 13F portfolio. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $48.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions consist of Paul Marshall and Ian Wace's Marshall Wace LLP, Andrew Weiss's Weiss Asset Management and . In terms of the portfolio weights assigned to each position Oldfield Partners allocated the biggest weight to SK Telecom Co., Ltd. (NYSE:SKM), around 6.62% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to SKM.

Judging by the fact that SK Telecom Co., Ltd. (NYSE:SKM) has witnessed declining sentiment from hedge fund managers, it's safe to say that there was a specific group of hedgies that elected to cut their entire stakes heading into Q4. Interestingly, Israel Englander's Millennium Management dropped the largest investment of all the hedgies followed by Insider Monkey, valued at an estimated $2.3 million in stock. D. E. Shaw's fund, D E Shaw, also cut its stock, about $1.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 4 funds heading into Q4.

Let's now review hedge fund activity in other stocks similar to SK Telecom Co., Ltd. (NYSE:SKM). We will take a look at Qorvo Inc (NASDAQ:QRVO), Warner Music Group Corp. (NASDAQ:WMG), Martin Marietta Materials, Inc. (NYSE:MLM), Campbell Soup Company (NYSE:CPB), Healthpeak Properties, Inc. (NYSE:PEAK), Energy Transfer L.P. (NYSE:ET), and Li Auto Inc. (NASDAQ:LI). This group of stocks' market valuations match SKM's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QRVO,51,1668362,0 WMG,20,662192,-11 MLM,38,1934050,-13 CPB,28,533547,-4 PEAK,22,290836,-1 ET,31,427313,0 LI,26,256910,26 Average,30.9,824744,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $825 million. That figure was $111 million in SKM's case. Qorvo Inc (NASDAQ:QRVO) is the most popular stock in this table. On the other hand Warner Music Group Corp. (NASDAQ:WMG) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks SK Telecom Co., Ltd. (NYSE:SKM) is even less popular than WMG. Our overall hedge fund sentiment score for SKM is 10.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards SKM. 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 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately SKM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SKM investors were disappointed as the stock returned 6.3% since the end of the third quarter (through 11/27) 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 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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