We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at hedge fund sentiment towards SHG.
Shinhan Financial Group Co., Ltd. (NYSE:SHG) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. SHG was in 3 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 5 hedge funds in our database with SHG holdings at the end of the previous quarter. Our calculations also showed that SHG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
If you’d ask most shareholders, hedge funds are seen as underperforming, old financial vehicles of the past. While there are more than 8000 funds with their doors open at present, Our experts look at the masters of this club, approximately 850 funds. These hedge fund managers administer the majority of the smart money’s total asset base, and by observing their highest performing picks, Insider Monkey has unearthed many investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Richard S. Pzena of Pzena Investment Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind we’re going to analyze the latest hedge fund action encompassing Shinhan Financial Group Co., Ltd. (NYSE:SHG).
How are hedge funds trading Shinhan Financial Group Co., Ltd. (NYSE:SHG)?
Heading into the first quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from the third quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in SHG a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Richard S. Pzena’s Pzena Investment Management has the most valuable position in Shinhan Financial Group Co., Ltd. (NYSE:SHG), worth close to $6.6 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $2.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to Shinhan Financial Group Co., Ltd. (NYSE:SHG), around 0.03% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.005 percent of its 13F equity portfolio to SHG.
Due to the fact that Shinhan Financial Group Co., Ltd. (NYSE:SHG) has witnessed a decline in interest from hedge fund managers, we can see that there was a specific group of hedge funds who sold off their positions entirely last quarter. At the top of the heap, Daniel Arbess’s Perella Weinberg Partners sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $1 million in stock. Ran Pang’s fund, Quantamental Technologies, also dumped its stock, about $0 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Shinhan Financial Group Co., Ltd. (NYSE:SHG) but similarly valued. These stocks are AmerisourceBergen Corporation (NYSE:ABC), Martin Marietta Materials, Inc. (NYSE:MLM), Teleflex Incorporated (NYSE:TFX), and Altice USA, Inc. (NYSE:ATUS). This group of stocks’ market caps are closest to SHG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ABC | 40 | 580579 | 2 |
| MLM | 52 | 2345404 | 9 |
| TFX | 32 | 936280 | 4 |
| ATUS | 54 | 3046592 | -1 |
| Average | 44.5 | 1727214 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.5 hedge funds with bullish positions and the average amount invested in these stocks was $1727 million. That figure was $9 million in SHG’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Teleflex Incorporated (NYSE:TFX) is the least popular one with only 32 bullish hedge fund positions. Compared to these stocks Shinhan Financial Group Co., Ltd. (NYSE:SHG) is even less popular than TFX. Hedge funds dodged a bullet by taking a bearish stance towards SHG. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately SHG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SHG investors were disappointed as the stock returned -45.3% during the same time period 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 most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
