We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Millicom International Cellular S.A. (NASDAQ:TIGO), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Millicom International Cellular S.A. (NASDAQ:TIGO) investors should pay attention to an increase in hedge fund interest recently. TIGO was in 7 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 6 hedge funds in our database with TIGO holdings at the end of the previous quarter. Our calculations also showed that TIGO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Bronchick of Cove Street Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the key hedge fund action encompassing Millicom International Cellular S.A. (NASDAQ:TIGO).
Hedge fund activity in Millicom International Cellular S.A. (NASDAQ:TIGO)
At Q4’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TIGO over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Mario Gabelli’s GAMCO Investors has the most valuable position in Millicom International Cellular S.A. (NASDAQ:TIGO), worth close to $45.7 million, accounting for 0.4% of its total 13F portfolio. On GAMCO Investors’s heels is Cove Street Capital, managed by Jeffrey Bronchick, which holds a $41.6 million position; 5.5% of its 13F portfolio is allocated to the company. Some other peers that are bullish encompass Renaissance Technologies, Israel Englander’s Millennium Management and John W. Moon’s Moon Capital. In terms of the portfolio weights assigned to each position Cove Street Capital allocated the biggest weight to Millicom International Cellular S.A. (NASDAQ:TIGO), around 5.5% of its 13F portfolio. Moon Capital is also relatively very bullish on the stock, earmarking 1.68 percent of its 13F equity portfolio to TIGO.
Now, key hedge funds were leading the bulls’ herd. Millennium Management, managed by Israel Englander, established the most outsized position in Millicom International Cellular S.A. (NASDAQ:TIGO). Millennium Management had $1.3 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Millicom International Cellular S.A. (NASDAQ:TIGO). We will take a look at Azul S.A. (NYSE:AZUL), bluebird bio Inc (NASDAQ:BLUE), Emcor Group Inc (NYSE:EME), and Graphic Packaging Holding Company (NYSE:GPK). This group of stocks’ market caps are closest to TIGO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AZUL | 11 | 194860 | -1 |
| BLUE | 33 | 369218 | 16 |
| EME | 29 | 238201 | 1 |
| GPK | 39 | 550850 | 3 |
| Average | 28 | 338282 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $338 million. That figure was $93 million in TIGO’s case. Graphic Packaging Holding Company (NYSE:GPK) is the most popular stock in this table. On the other hand Azul S.A. (NYSE:AZUL) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Millicom International Cellular S.A. (NASDAQ:TIGO) is even less popular than AZUL. Hedge funds dodged a bullet by taking a bearish stance towards TIGO. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately TIGO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TIGO investors were disappointed as the stock returned -41.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
