Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) and see how the stock is affected by the recent hedge fund activity.
Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) was in 14 hedge funds' portfolios at the end of June. SMFG has experienced an increase in hedge fund sentiment lately. There were 10 hedge funds in our database with SMFG positions at the end of the previous quarter. Our calculations also showed that SMFG isn't among the 30 most popular stocks among hedge funds (watch the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the key hedge fund action encompassing Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG).
How are hedge funds trading Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG)?
At Q2's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in SMFG a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) was held by Fisher Asset Management, which reported holding $429.1 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $30.2 million position. Other investors bullish on the company included LMR Partners, D E Shaw, and Two Sigma Advisors.
Consequently, specific money managers were breaking ground themselves. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, assembled the biggest position in Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG). LMR Partners had $7.9 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle's Springbok Capital also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new SMFG investors: Minhua Zhang's Weld Capital Management, Dmitry Balyasny's Balyasny Asset Management, and Michael Gelband's ExodusPoint Capital.
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 Waste Management, Inc. (NYSE:WM), America Movil SAB de CV (NYSE:AMX), Suncor Energy Inc. (NYSE:SU), and Illinois Tool Works Inc. (NYSE:ITW). All of these stocks' market caps match SMFG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WM,35,3415842,2 AMX,9,188315,-5 SU,32,1296788,-1 ITW,28,306050,1 Average,26,1301749,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $1302 million. That figure was $477 million in SMFG's case. Waste Management, Inc. (NYSE:WM) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 9 bullish hedge fund positions. Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SMFG wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SMFG investors were disappointed as the stock returned -3.1% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.