Did Hedge Funds Make The Right Call On Nokia Corporation (NOK) ?

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. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Nokia Corporation (NYSE:NOK) and determine whether the smart money was really smart about this stock.

Is Nokia Corporation (NYSE:NOK) undervalued? Investors who are in the know were becoming hopeful. The number of long hedge fund bets increased by 7 recently. Our calculations also showed that NOK 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). NOK was in 23 hedge funds’ portfolios at the end of March. There were 16 hedge funds in our database with NOK holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most shareholders, hedge funds are viewed as worthless, outdated investment vehicles of years past. While there are over 8000 funds trading at the moment, Our researchers choose to focus on the crème de la crème of this group, around 850 funds. These hedge fund managers oversee the majority of the smart money’s total asset base, and by tracking their matchless picks, Insider Monkey has spotted many investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

John Rogers Ariel Investments

John Rogers of Ariel Investments

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind we’re going to take a gander at the latest hedge fund action encompassing Nokia Corporation (NYSE:NOK).

What does smart money think about Nokia Corporation (NYSE:NOK)?

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NOK over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

More specifically, Ariel Investments was the largest shareholder of Nokia Corporation (NYSE:NOK), with a stake worth $55.3 million reported as of the end of September. Trailing Ariel Investments was Arrowstreet Capital, which amassed a stake valued at $26.4 million. D E Shaw, Sirios Capital Management, and Renaissance Technologies 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 Boardman Bay Capital Management allocated the biggest weight to Nokia Corporation (NYSE:NOK), around 2.17% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, designating 1.84 percent of its 13F equity portfolio to NOK.

As one would reasonably expect, specific money managers have been driving this bullishness. Sirios Capital Management, managed by John Brennan, established the biggest position in Nokia Corporation (NYSE:NOK). Sirios Capital Management had $20.8 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $11.1 million position during the quarter. The following funds were also among the new NOK investors: Dmitry Balyasny’s Balyasny Asset Management, John Hurley’s Cavalry Asset Management, and George McCabe’s Portolan Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Nokia Corporation (NYSE:NOK) but similarly valued. These stocks are Dollar Tree, Inc. (NASDAQ:DLTR), Citrix Systems, Inc. (NASDAQ:CTXS), Alexandria Real Estate Equities Inc (NYSE:ARE), and TransDigm Group Incorporated (NYSE:TDG). This group of stocks’ market values are similar to NOK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DLTR 42 1353619 -9
CTXS 38 1418404 4
ARE 29 196351 8
TDG 58 3800759 -5
Average 41.75 1692283 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.75 hedge funds with bullish positions and the average amount invested in these stocks was $1692 million. That figure was $178 million in NOK’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand Alexandria Real Estate Equities Inc (NYSE:ARE) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Nokia Corporation (NYSE:NOK) is even less popular than ARE. Hedge funds clearly dropped the ball on NOK as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on NOK as the stock returned 41.9% in the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.