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Are Hedge Funds Turning Bullish Enough On Public Joint-Stock Company Mobile TeleSystems (MBT)?

Reymerlyn Martin

The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT) from the perspective of those elite funds.

Is Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT) a buy here? The smart money is turning bullish. The number of long hedge fund bets improved by 1 lately. Our calculations also showed that MBT isn't among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.

We're going to take a glance at the key hedge fund action surrounding Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT).

D. E. Shaw

Hedge fund activity in Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT)

Heading into the first quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the second quarter of 2018. On the other hand, there were a total of 10 hedge funds with a bullish position in MBT a year ago. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

MBT_mar2019

Among these funds, Renaissance Technologies held the most valuable stake in Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT), which was worth $179.3 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $30.1 million worth of shares. Moreover, Millennium Management, D E Shaw, and GLG Partners were also bullish on Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, key money managers have been driving this bullishness. GLG Partners, managed by Noam Gottesman, created the largest position in Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT). GLG Partners had $2.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $1.9 million position during the quarter. The other funds with new positions in the stock are Bruce Kovner's Caxton Associates LP, Minhua Zhang's Weld Capital Management, and Michael Gelband's ExodusPoint Capital.

Let's now review hedge fund activity in other stocks similar to Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT). We will take a look at NICE Ltd. (NASDAQ:NICE), Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), Tilray, Inc. (NASDAQ:TLRY), and Brookfield Property Partners LP (NASDAQ:BPY). This group of stocks' market caps are closest to MBT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NICE,15,192932,1 AVAL,9,17834,3 TLRY,8,203753,-1 BPY,8,86346,-3 Average,10,125216,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $233 million in MBT's case. NICE Ltd. (NASDAQ:NICE) is the most popular stock in this table. On the other hand Tilray, Inc. (NASDAQ:TLRY) is the least popular one with only 8 bullish hedge fund positions. Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that the top 15 most popular stocks among hedge funds returned 21.3% year-to-date through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on MBT, though not to the same extent, as the stock returned 16.3% and outperformed the market as well.

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

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