The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards BT Group plc (ADR) (NYSE:BT), and what that likely means for the prospects of the company and its stock.
BT Group plc (ADR) (NYSE:BT) was in 11 hedge funds’ portfolios at the end of September. BT has seen an increase in hedge fund sentiment lately. There were ten hedge funds in our database with BT holdings at the end of the previous quarter. At the end of this article we will also compare BT to other stocks including The Bank of Nova Scotia (USA) (NYSE:BNS), Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA), and Metlife Inc (NYSE:MET) to get a better sense of its popularity.
According to most stock holders, hedge funds are viewed as underperforming, outdated investment tools of the past. While there are more than 8,000 funds trading at present, experts at hedge fund tracking site Insider Monkey choose to focus on the top tier of this club, around 700 funds. Most estimates calculate that this group of people administer the majority of all hedge funds’ total capital, and by keeping track of their inimitable investments, Insider Monkey has uncovered numerous investment strategies that have historically outperformed the market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in its backtests.
Keeping this in mind, let’s take a peek at the fresh action encompassing BT Group plc (ADR) (NYSE:BT).
Hedge fund activity in BT Group plc (ADR) (NYSE:BT)
Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were bullish in this stock, an uptick of 10% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb-and-flow, there exists a select group of key hedge fund managers who were upping their holdings substantially.
According to Insider Monkey’s hedge fund database, Jim Simons’ Renaissance Technologies has the biggest position in BT Group plc (ADR) (NYSE:BT), worth close to $119.5 million, accounting for 0.3% of its total 13F portfolio. The second-most bullish hedge fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $23.9 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism comprise Thomas Bailard’s Bailard Inc, John Overdeck and David Siegel’s Two Sigma Advisors, and J. Alan Reid, Jr.’s Forward Management.
Now, some big names have been driving this bullishness. HBK Investments, managed by David Costen Haley, established the largest position in BT Group plc (ADR) (NYSE:BT). HBK Investments had $0.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.3 million investment in the stock during the quarter.
Let’s also examine hedge fund activity in other stocks similar to BT Group plc (ADR) (NYSE:BT). We will take a look at The Bank of Nova Scotia (USA) (NYSE:BNS), Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA), Metlife Inc (NYSE:MET), and National Grid plc (ADR) (NYSE:NGG). All of these stocks’ market caps resemble BT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $555 million. The same pool of investors held just $151 million worth of BT Group’s shares, or 0.30% of its common shares. Metlife Inc (NYSE:MET) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA) is the least popular one with only four bullish hedge fund positions. BT Group plc (ADR) (NYSE:BT) 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 MET might be a better candidate to consider a long position in.