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Here is What Hedge Funds Think About T-Mobile US, Inc. (TMUS)

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  • TMUS

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards T-Mobile US, Inc. (NASDAQ:TMUS).

Is T-Mobile US, Inc. (NASDAQ:TMUS) a first-rate stock to buy now? Hedge funds were getting less optimistic. The number of long hedge fund positions shrunk by 11 in recent months. T-Mobile US, Inc. (NASDAQ:TMUS) was in 89 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 113. Our calculations also showed that TMUS ranked 25th among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to analyze the recent hedge fund action surrounding T-Mobile US, Inc. (NASDAQ:TMUS).

Daniel Sundheim D1 Capital
Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital

Do Hedge Funds Think TMUS Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 89 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the second quarter of 2021. On the other hand, there were a total of 94 hedge funds with a bullish position in TMUS a year ago. With hedgies' capital changing hands, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

The largest stake in T-Mobile US, Inc. (NASDAQ:TMUS) was held by Viking Global, which reported holding $1306.4 million worth of stock at the end of September. It was followed by Berkshire Hathaway with a $669.7 million position. Other investors bullish on the company included D1 Capital Partners, Farallon Capital, and Appaloosa Management LP. In terms of the portfolio weights assigned to each position BlueDrive Global Investors allocated the biggest weight to T-Mobile US, Inc. (NASDAQ:TMUS), around 19.37% of its 13F portfolio. RIT Capital Partners is also relatively very bullish on the stock, earmarking 14.13 percent of its 13F equity portfolio to TMUS.

Due to the fact that T-Mobile US, Inc. (NASDAQ:TMUS) has faced falling interest from the smart money, it's easy to see that there lies a certain "tier" of funds who sold off their entire stakes heading into Q4. It's worth mentioning that Josh Resnick's Jericho Capital Asset Management sold off the biggest investment of the 750 funds watched by Insider Monkey, comprising about $84 million in stock. Ike Kier and Ilya Zaides's fund, KG Funds Management, also dumped its stock, about $68.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 11 funds heading into Q4.

Let's now take a look at hedge fund activity in other stocks similar to T-Mobile US, Inc. (NASDAQ:TMUS). We will take a look at SAP SE (NYSE:SAP), United Parcel Service, Inc. (NYSE:UPS), Moderna, Inc. (NASDAQ:MRNA), NextEra Energy, Inc. (NYSE:NEE), Linde plc (NYSE:LIN), Charter Communications, Inc. (NASDAQ:CHTR), and Philip Morris International Inc. (NYSE:PM). This group of stocks' market valuations are closest to TMUS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAP,15,1529829,-2 UPS,42,1266269,-10 MRNA,49,7315014,12 NEE,53,2374429,-6 LIN,46,4769164,-9 CHTR,74,18794064,-1 PM,48,5924682,2 Average,46.7,5996207,-2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.7 hedge funds with bullish positions and the average amount invested in these stocks was $5996 million. That figure was $6929 million in TMUS's case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks T-Mobile US, Inc. (NASDAQ:TMUS) is more popular among hedge funds. Our overall hedge fund sentiment score for TMUS is 67.6. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately TMUS wasn't nearly as popular as these 5 stocks and hedge funds that were betting on TMUS were disappointed as the stock returned -14.8% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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