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Hedge Fund Sentiment Is Stagnant On Vodafone Group Plc (VOD)

“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.

Vodafone Group Plc (NASDAQ:VOD) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Duke Energy Corporation (NYSE:DUK), Twenty-First Century Fox Inc (NASDAQ:FOXA), and Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) to gather more data points.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT

Let’s go over the fresh hedge fund action encompassing Vodafone Group Plc (NASDAQ:VOD).

What does the smart money think about Vodafone Group Plc (NASDAQ:VOD)?

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, no change from the second quarter of 2018. By comparison, 18 hedge funds held shares or bullish call options in VOD heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with VOD Positions

The largest stake in Vodafone Group Plc (NASDAQ:VOD) was held by Fisher Asset Management, which reported holding $460.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $238.4 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Millennium Management.

Seeing as Vodafone Group Plc (NASDAQ:VOD) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few money managers that elected to cut their positions entirely in the third quarter. At the top of the heap, Jonathon Jacobson’s Highfields Capital Management dropped the biggest stake of all the hedgies watched by Insider Monkey, comprising close to $13.8 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $2.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Vodafone Group Plc (NASDAQ:VOD). We will take a look at Duke Energy Corporation (NYSE:DUK), Twenty-First Century Fox Inc (NASDAQ:FOXA), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), and Enbridge Inc (NYSE:ENB). All of these stocks’ market caps match VOD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DUK 17 1227955 -7
FOXA 73 10493159 -5
SMFG 10 500999 2
ENB 21 185171 5
Average 30.25 3101821 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $3.10 billion. That figure was $944 million in VOD’s case. Twenty-First Century Fox Inc (NASDAQ:FOXA) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 10 bullish hedge fund positions. Vodafone Group Plc (NASDAQ:VOD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FOXA might be a better candidate to consider a long position.

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

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