Telefonaktiebolaget LM Ericsson (publ) (ERIC) Fell Out Of Favor With Hedge Funds
In this article you are going to find out whether hedge funds think Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) shareholders have witnessed a decrease in activity from the world's largest hedge funds lately. Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) was in 19 hedge funds' portfolios at the end of March. The all time high for this statistic is 25. There were 20 hedge funds in our database with ERIC holdings at the end of December. Our calculations also showed that ERIC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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Ken Griffin of Citadel Investment Group
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Do Hedge Funds Think ERIC Is A Good Stock To Buy Now?
At the end of March, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the fourth quarter of 2020. On the other hand, there were a total of 20 hedge funds with a bullish position in ERIC a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the most valuable position in Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), worth close to $68.4 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Cavalry Asset Management, led by John Hurley, holding a $59.1 million position; 5.5% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions consist of Ken Griffin's Citadel Investment Group, Renaissance Technologies and Steve Cohen's Point72 Asset Management. In terms of the portfolio weights assigned to each position Cavalry Asset Management allocated the biggest weight to Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), around 5.49% of its 13F portfolio. Ulysses Management is also relatively very bullish on the stock, dishing out 1.45 percent of its 13F equity portfolio to ERIC.
Due to the fact that Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of money managers that elected to cut their positions entirely in the first quarter. It's worth mentioning that Kenneth Squire's 13D Management dropped the largest investment of all the hedgies followed by Insider Monkey, valued at an estimated $7.7 million in stock, and Larry Chen and Terry Zhang's Tairen Capital was right behind this move, as the fund sold off about $6.1 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC). We will take a look at Bilibili Inc. (NASDAQ:BILI), SYSCO Corporation (NYSE:SYY), Sempra Energy (NYSE:SRE), Chipotle Mexican Grill, Inc. (NYSE:CMG), Lululemon Athletica inc. (NASDAQ:LULU), American International Group Inc (NYSE:AIG), and Digital Realty Trust, Inc. (NYSE:DLR). This group of stocks' market values are closest to ERIC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BILI,53,3015445,7 SYY,42,2719253,2 SRE,27,596834,-6 CMG,41,3037666,6 LULU,41,751855,-9 AIG,33,2471193,-8 DLR,22,296357,-1 Average,37,1841229,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1841 million. That figure was $318 million in ERIC's case. Bilibili Inc. (NASDAQ:BILI) is the most popular stock in this table. On the other hand Digital Realty Trust, Inc. (NYSE:DLR) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) is even less popular than DLR. Our overall hedge fund sentiment score for ERIC is 26.8. 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. Hedge funds dodged a bullet by taking a bearish stance towards ERIC. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th but managed to beat the market again by 7.7 percentage points. Unfortunately ERIC wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); ERIC investors were disappointed as the stock returned -10.4% since the end of the first quarter (through 7/16) 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.
