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"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on SK Telecom Co., Ltd. (NYSE:SKM) in order to identify whether reputable and successful top money managers continue to believe in its potential.
SK Telecom Co., Ltd. (NYSE:SKM) has seen a decrease in hedge fund interest lately. SKM was in 6 hedge funds' portfolios at the end of the third quarter of 2019. There were 7 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 (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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David E. Shaw of D.E. Shaw[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to take a glance at the latest hedge fund action encompassing SK Telecom Co., Ltd. (NYSE:SKM).
How are hedge funds trading SK Telecom Co., Ltd. (NYSE:SKM)?
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in SKM a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in SK Telecom Co., Ltd. (NYSE:SKM) was held by Arrowstreet Capital, which reported holding $22.8 million worth of stock at the end of September. It was followed by Sensato Capital Management with a $7.8 million position. Other investors bullish on the company included LMR Partners, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Sensato Capital Management allocated the biggest weight to SK Telecom Co., Ltd. (NYSE:SKM), around 2.97% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, setting aside 0.27 percent of its 13F equity portfolio to SKM.
Because SK Telecom Co., Ltd. (NYSE:SKM) has witnessed bearish sentiment from hedge fund managers, it's safe to say that there exists a select few hedge funds that elected to cut their positions entirely last quarter. It's worth mentioning that Renaissance Technologies cut the biggest stake of the "upper crust" of funds watched by Insider Monkey, valued at close to $0.8 million in stock. Matthew Tewksbury's fund, Stevens Capital Management, also said goodbye to its stock, about $0.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's check out hedge fund activity in other stocks similar to SK Telecom Co., Ltd. (NYSE:SKM). We will take a look at Pinterest, Inc. (NYSE:PINS), Xylem Inc (NYSE:XYL), Discovery Communications Inc. (NASDAQ:DISCA), and Broadridge Financial Solutions, Inc. (NYSE:BR). 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 PINS,31,980235,0 XYL,19,524367,0 DISCA,26,418972,2 BR,27,312931,6 Average,25.75,559126,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $559 million. That figure was $43 million in SKM's case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks SK Telecom Co., Ltd. (NYSE:SKM) is even less popular than XYL. 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 3.2% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.