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Did Hedge Funds Make The Right Call On Sony Corporation (SNE)?

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 Sony Corporation (NYSE:SNE) and determine whether the smart money was really smart about this stock.

Is Sony Corporation (NYSE:SNE) an exceptional investment right now? Hedge funds were turning bullish. The number of bullish hedge fund positions rose by 2 in recent months. Our calculations also showed that SNE 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). SNE was in 28 hedge funds’ portfolios at the end of March. There were 26 hedge funds in our database with SNE holdings at the end of the previous quarter.

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

Today there are several signals investors have at their disposal to grade their stock investments. Two of the most under-the-radar signals are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the elite fund managers can outperform the broader indices by a solid margin (see the details here).

Eric Mandelblatt Soroban Capital Partners

Eric Mandelblatt of Soroban Capital Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the new hedge fund action surrounding Sony Corporation (NYSE:SNE).

What have hedge funds been doing with Sony Corporation (NYSE:SNE)?

At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SNE over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Mario Gabelli’s GAMCO Investors has the largest position in Sony Corporation (NYSE:SNE), worth close to $175.7 million, comprising 2.1% of its total 13F portfolio. The second largest stake is held by Eric W. Mandelblatt and Gaurav Kapadia of Soroban Capital Partners, with a $48.2 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Other peers that hold long positions include Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Dan Loeb’s Third Point and Renaissance Technologies. In terms of the portfolio weights assigned to each position Oasis Management allocated the biggest weight to Sony Corporation (NYSE:SNE), around 19.64% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, earmarking 5.5 percent of its 13F equity portfolio to SNE.

As industrywide interest jumped, some big names were leading the bulls’ herd. Soroban Capital Partners, managed by Eric W. Mandelblatt and Gaurav Kapadia, established the biggest position in Sony Corporation (NYSE:SNE). Soroban Capital Partners had $48.2 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $42.1 million position during the quarter. The other funds with brand new SNE positions are Seth Fischer’s Oasis Management, Rob Citrone’s Discovery Capital Management, and Matthew Moskey and Friedrich Schulte-Hillen’s Athos Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sony Corporation (NYSE:SNE) but similarly valued. These stocks are T-Mobile US, Inc. (NASDAQ:TMUS), Altria Group Inc (NYSE:MO), Mondelez International Inc (NASDAQ:MDLZ), and HDFC Bank Limited (NYSE:HDB). This group of stocks’ market valuations match SNE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TMUS 65 1645711 4
MO 46 1439983 -8
MDLZ 54 2218156 4
HDB 38 1852582 -1
Average 50.75 1789108 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.75 hedge funds with bullish positions and the average amount invested in these stocks was $1789 million. That figure was $461 million in SNE’s case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand HDFC Bank Limited (NYSE:HDB) is the least popular one with only 38 bullish hedge fund positions. Compared to these stocks Sony Corporation (NYSE:SNE) is even less popular than HDB. Hedge funds dodged a bullet by taking a bearish stance towards SNE. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market by 15.5 percentage points. Unfortunately SNE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SNE investors were disappointed as the stock returned 16.8% 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 so far in 2020.

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