At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
SK Telecom Co., Ltd. (NYSE:SKM) was in 7 hedge funds' portfolios at the end of the second quarter of 2019. SKM investors should be aware of an increase in enthusiasm from smart money in recent months. There were 6 hedge funds in our database with SKM holdings at the end of the previous quarter. Our calculations also showed that SKM isn't among the 30 most popular stocks among hedge funds (view 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. Let's review the recent hedge fund action encompassing SK Telecom Co., Ltd. (NYSE:SKM).
How have hedgies been trading SK Telecom Co., Ltd. (NYSE:SKM)?
At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in SKM a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in SK Telecom Co., Ltd. (NYSE:SKM), which was worth $31 million at the end of the second quarter. On the second spot was Sensato Capital Management which amassed $10.1 million worth of shares. Moreover, LMR Partners, D E Shaw, and Millennium Management were also bullish on SK Telecom Co., Ltd. (NYSE:SKM), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, established the most valuable position in SK Telecom Co., Ltd. (NYSE:SKM). Millennium Management had $2.3 million invested in the company at the end of the quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as SK Telecom Co., Ltd. (NYSE:SKM) but similarly valued. We will take a look at Principal Financial Group Inc (NASDAQ:PFG), STMicroelectronics N.V. (NYSE:STM), Citizens Financial Group Inc (NYSE:CFG), and Franco-Nevada Corporation (NYSE:FNV). This group of stocks' market caps match SKM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFG,17,113373,2 STM,13,111744,-1 CFG,39,1255204,-2 FNV,18,532557,-1 Average,21.75,503220,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $503 million. That figure was $53 million in SKM's case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks SK Telecom Co., Ltd. (NYSE:SKM) is even less popular than STM. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -10.3% 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.