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Hedge Funds Have Never Been This Bullish On Tencent Music Entertainment (TME)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Tencent Music Entertainment Group (NYSE:TME) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Tencent Music Entertainment Group (NYSE:TME) a buy right now? The best stock pickers were turning bullish. The number of bullish hedge fund bets advanced by 5 recently. Tencent Music Entertainment Group (NYSE:TME) was in 30 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TME isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 25 hedge funds in our database with TME holdings at the end of March.

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

If you’d ask most investors, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are over 8000 funds trading at the moment, Our researchers choose to focus on the masters of this group, around 850 funds. Most estimates calculate that this group of people preside over bulk of the hedge fund industry’s total asset base, and by shadowing their top investments, Insider Monkey has figured out a number of investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Gil Simon of SoMa Equity Partners

Gil Simon of SoMa Equity Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a glance at the latest hedge fund action regarding Tencent Music Entertainment Group (NYSE:TME).

What have hedge funds been doing with Tencent Music Entertainment Group (NYSE:TME)?

At second quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the first quarter of 2020. By comparison, 11 hedge funds held shares or bullish call options in TME a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in Tencent Music Entertainment Group (NYSE:TME) was held by Renaissance Technologies, which reported holding $164.9 million worth of stock at the end of September. It was followed by SoMa Equity Partners with a $107.7 million position. Other investors bullish on the company included Tiger Pacific Capital, Tiger Global Management LLC, and Millennium Management. In terms of the portfolio weights assigned to each position Tiger Pacific Capital allocated the biggest weight to Tencent Music Entertainment Group (NYSE:TME), around 22.85% of its 13F portfolio. Kingstown Capital Management is also relatively very bullish on the stock, setting aside 11.09 percent of its 13F equity portfolio to TME.

Now, key money managers were leading the bulls’ herd. SoMa Equity Partners, managed by Gil Simon, initiated the biggest position in Tencent Music Entertainment Group (NYSE:TME). SoMa Equity Partners had $107.7 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also made a $19.8 million investment in the stock during the quarter. The following funds were also among the new TME investors: Paul Tudor Jones’s Tudor Investment Corp, Ryan Caldwell’s Chiron Investment Management, and Simon Sadler’s Segantii Capital.

Let’s check out hedge fund activity in other stocks similar to Tencent Music Entertainment Group (NYSE:TME). We will take a look at Liberty Broadband Corp (NASDAQ:LBRDA), Liberty Broadband Corp (NASDAQ:LBRDK), Best Buy Co., Inc. (NYSE:BBY), State Street Corporation (NYSE:STT), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Fortinet Inc (NASDAQ:FTNT), and Archer Daniels Midland Company (NYSE:ADM). This group of stocks’ market values resemble TME’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LBRDA 22 718343 -4
LBRDK 58 3372154 13
BBY 33 1062886 -4
STT 36 668259 2
BMRN 45 2005739 -9
FTNT 44 1815016 15
ADM 28 606680 -4
Average 38 1464154 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $1464 million. That figure was $538 million in TME’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Liberty Broadband Corp (NASDAQ:LBRDA) is the least popular one with only 22 bullish hedge fund positions. Tencent Music Entertainment Group (NYSE:TME) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TME is 51.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. A small number of hedge funds were also right about betting on TME as the stock returned 18.7% since the end of June (through September 14th) and outperformed the market by an even larger margin.

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