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Here is What Hedge Funds Think About Shinhan Financial Group Co., Ltd. (SHG)

Abigail Fisher
·6 min read

The Insider Monkey team has completed processing the quarterly 13F filings for the September 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 Shinhan Financial Group Co., Ltd. (NYSE:SHG).

Shinhan Financial Group Co., Ltd. (NYSE:SHG) investors should pay attention to an increase in hedge fund interest recently. Shinhan Financial Group Co., Ltd. (NYSE:SHG) was in 4 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. There were 2 hedge funds in our database with SHG holdings at the end of June. Our calculations also showed that SHG 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Richard Pzena - Pzena Investment Management
Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

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. Now we're going to review the latest hedge fund action regarding Shinhan Financial Group Co., Ltd. (NYSE:SHG).

Hedge fund activity in Shinhan Financial Group Co., Ltd. (NYSE:SHG)

Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SHG over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Shinhan Financial Group Co., Ltd. (NYSE:SHG). Pzena Investment Management has a $14.5 million position in the stock, comprising 0.1% of its 13F portfolio. On Pzena Investment Management's heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $3.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism consist of Michael Gelband's ExodusPoint Capital, Ken Griffin's Citadel Investment Group and . In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to Shinhan Financial Group Co., Ltd. (NYSE:SHG), around 0.09% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to SHG.

Now, some big names were leading the bulls' herd. ExodusPoint Capital, managed by Michael Gelband, initiated the most outsized position in Shinhan Financial Group Co., Ltd. (NYSE:SHG). ExodusPoint Capital had $0.6 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $0.3 million investment in the stock during the quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Shinhan Financial Group Co., Ltd. (NYSE:SHG) but similarly valued. We will take a look at Lumen Technologies, Inc. (NYSE:LUMN), W.R. Berkley Corporation (NYSE:WRB), Gold Fields Limited (NYSE:GFI), Molina Healthcare, Inc. (NYSE:MOH), Citizens Financial Group Inc (NYSE:CFG), The Boston Beer Company Inc (NYSE:SAM), and RPM International Inc. (NYSE:RPM). All of these stocks' market caps resemble SHG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LUMN,31,762836,1 WRB,28,382157,1 GFI,15,508773,0 MOH,35,1418238,1 CFG,36,467127,-11 SAM,36,1212955,4 RPM,26,122123,0 Average,29.6,696316,-0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $696 million. That figure was $19 million in SHG's case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand Gold Fields Limited (NYSE:GFI) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Shinhan Financial Group Co., Ltd. (NYSE:SHG) is even less popular than GFI. Our overall hedge fund sentiment score for SHG is 20.3. 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 clearly dropped the ball on SHG as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds 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 and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on SHG as the stock returned 35.6% since Q3 (through November 27th) and outperformed the market by an even larger margin.

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

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