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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Telecom Argentina S.A. (NYSE:TEO) based on that data.
Telecom Argentina S.A. (NYSE:TEO) was in 4 hedge funds' portfolios at the end of the first quarter of 2020. TEO investors should be aware of a decrease in support from the world's most elite money managers of late. There were 5 hedge funds in our database with TEO holdings at the end of the previous quarter. Our calculations also showed that TEO isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Paul Marshall of Marshall Wace[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a look at the latest hedge fund action regarding Telecom Argentina S.A. (NYSE:TEO).
What have hedge funds been doing with Telecom Argentina S.A. (NYSE:TEO)?
At Q1's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the fourth quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in TEO a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Howard Marks's Oaktree Capital Management has the biggest position in Telecom Argentina S.A. (NYSE:TEO), worth close to $18.1 million, corresponding to 0.5% of its total 13F portfolio. The second largest stake is held by Redwood Capital Management, led by Jonathan Kolatch, holding a $13.7 million position; 2.5% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish include Paul Marshall and Ian Wace's Marshall Wace LLP, and Bart Baum's Ionic Capital Management. In terms of the portfolio weights assigned to each position Redwood Capital Management allocated the biggest weight to Telecom Argentina S.A. (NYSE:TEO), around 2.5% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, setting aside 0.51 percent of its 13F equity portfolio to TEO.
Because Telecom Argentina S.A. (NYSE:TEO) has witnessed falling interest from hedge fund managers, we can see that there exists a select few funds that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Renaissance Technologies sold off the largest investment of the 750 funds followed by Insider Monkey, comprising close to $0.7 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund said goodbye to about $0.4 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Telecom Argentina S.A. (NYSE:TEO) but similarly valued. These stocks are Mercury Systems Inc (NASDAQ:MRCY), RLI Corp. (NYSE:RLI), Five Below Inc (NASDAQ:FIVE), and Israel Chemicals Ltd. (NYSE:ICL). All of these stocks' market caps are closest to TEO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRCY,12,47030,-12 RLI,15,192969,-10 FIVE,31,404860,-11 ICL,3,3107,-3 Average,15.25,161992,-9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $32 million in TEO's case. Five Below Inc (NASDAQ:FIVE) is the most popular stock in this table. On the other hand Israel Chemicals Ltd. (NYSE:ICL) is the least popular one with only 3 bullish hedge fund positions. Telecom Argentina S.A. (NYSE:TEO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately TEO wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TEO investors were disappointed as the stock returned -6.8% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.