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Here is Hedge Funds’ 23rd Most Popular Stock?

Is T-Mobile US, Inc. (NASDAQ:TMUS) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

T-Mobile US, Inc. (NASDAQ:TMUS) was in 78 hedge funds’ portfolios at the end of the second quarter of 2019. TMUS has experienced an increase in enthusiasm from smart money of late. There were 62 hedge funds in our database with TMUS positions at the end of the previous quarter. Our calculations also showed that TMUS ranked 23rd among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Lee Ainslie MAVERICK CAPITAL

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the latest hedge fund action encompassing T-Mobile US, Inc. (NASDAQ:TMUS).

How have hedgies been trading T-Mobile US, Inc. (NASDAQ:TMUS)?

Heading into the third quarter of 2019, a total of 78 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from one quarter earlier. By comparison, 68 hedge funds held shares or bullish call options in TMUS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

TMUS_oct2019

More specifically, Citadel Investment Group was the largest shareholder of T-Mobile US, Inc. (NASDAQ:TMUS), with a stake worth $308 million reported as of the end of March. Trailing Citadel Investment Group was Maverick Capital, which amassed a stake valued at $283.1 million. D E Shaw, Paulson & Co, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Glenview Capital, managed by Larry Robbins, established the biggest position in T-Mobile US, Inc. (NASDAQ:TMUS). Glenview Capital had $88.4 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also initiated a $57.5 million position during the quarter. The other funds with new positions in the stock are Farallon Capital, Carl Tiedemann and Michael Tiedemann’s TIG Advisors, and Phill Gross and Robert Atchinson’s Adage Capital Management.

Let’s go over hedge fund activity in other stocks similar to T-Mobile US, Inc. (NASDAQ:TMUS). We will take a look at The TJX Companies, Inc. (NYSE:TJX), Enterprise Products Partners L.P. (NYSE:EPD), CSX Corporation (NASDAQ:CSX), and PNC Financial Services Group Inc. (NYSE:PNC). All of these stocks’ market caps are closest to TMUS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TJX 50 2307933 -4
EPD 19 365269 -1
CSX 46 4858607 2
PNC 38 2671227 -2
Average 38.25 2550759 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $2551 million. That figure was $2626 million in TMUS’s case. The TJX Companies, Inc. (NYSE:TJX) is the most popular stock in this table. On the other hand Enterprise Products Partners L.P. (NYSE:EPD) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks T-Mobile US, Inc. (NASDAQ:TMUS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on TMUS as the stock returned 6.2% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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