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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded TELUS Corporation (NYSE:TU) based on those filings.
Is TELUS Corporation (NYSE:TU) ready to rally soon? Money managers were in a pessimistic mood. The number of long hedge fund positions were trimmed by 3 lately. TELUS Corporation (NYSE:TU) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 20. Our calculations also showed that TU isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 15 hedge funds in our database with TU holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 66 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 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 stocks that are in our short portfolio.
Robert Richards of Heathbridge Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's review the key hedge fund action surrounding TELUS Corporation (NYSE:TU).
Do Hedge Funds Think TU Is A Good Stock To Buy Now?
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in TU a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in TELUS Corporation (NYSE:TU), which was worth $122.2 million at the end of the third quarter. On the second spot was Heathbridge Capital Management which amassed $25 million worth of shares. GLG Partners, D E Shaw, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Heathbridge Capital Management allocated the biggest weight to TELUS Corporation (NYSE:TU), around 9.77% of its 13F portfolio. Unio Capital is also relatively very bullish on the stock, dishing out 0.21 percent of its 13F equity portfolio to TU.
Since TELUS Corporation (NYSE:TU) has experienced a decline in interest from the smart money, it's safe to say that there lies a certain "tier" of fund managers that decided to sell off their positions entirely in the third quarter. It's worth mentioning that Israel Englander's Millennium Management said goodbye to the largest position of the "upper crust" of funds followed by Insider Monkey, valued at close to $9.7 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund cut about $1.6 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as TELUS Corporation (NYSE:TU) but similarly valued. We will take a look at Nutrien Ltd. (NYSE:NTR), Yum China Holdings, Inc. (NYSE:YUMC), DTE Energy Company (NYSE:DTE), Kellogg Company (NYSE:K), Southwest Airlines Co. (NYSE:LUV), Cerner Corporation (NASDAQ:CERN), and Wheaton Precious Metals Corp. (NYSE:WPM). This group of stocks' market valuations resemble TU's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTR,26,550380,4 YUMC,39,1096345,4 DTE,28,232166,4 K,35,483978,2 LUV,51,744922,-5 CERN,34,789984,-4 WPM,29,932017,8 Average,34.6,689970,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.6 hedge funds with bullish positions and the average amount invested in these stocks was $690 million. That figure was $164 million in TU's case. Southwest Airlines Co. (NYSE:LUV) is the most popular stock in this table. On the other hand Nutrien Ltd. (NYSE:NTR) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks TELUS Corporation (NYSE:TU) is even less popular than NTR. Our overall hedge fund sentiment score for TU is 20. 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 clearly dropped the ball on TU as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on TU as the stock returned 13.3% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.