Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards SK Telecom Co., Ltd. (NYSE:SKM).
Is SK Telecom Co., Ltd. (NYSE:SKM) a first-rate investment right now? Investors who are in the know are becoming less hopeful. The number of long hedge fund bets dropped by 1 recently. Our calculations also showed that SKM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Now we’re going to view the fresh hedge fund action surrounding SK Telecom Co., Ltd. (NYSE:SKM).
What have hedge funds been doing with SK Telecom Co., Ltd. (NYSE:SKM)?
At Q4’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in SKM a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Richard Oldfield’s Oldfield Partners has the number one position in SK Telecom Co., Ltd. (NYSE:SKM), worth close to $82.8 million, comprising 7.3% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $40 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish comprise Ernest Chow and Jonathan Howe’s Sensato Capital Management, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Oldfield Partners allocated the biggest weight to SK Telecom Co., Ltd. (NYSE:SKM), around 7.35% of its 13F portfolio. Sensato Capital Management is also relatively very bullish on the stock, designating 5.18 percent of its 13F equity portfolio to SKM.
Seeing as SK Telecom Co., Ltd. (NYSE:SKM) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of funds that slashed their positions entirely by the end of the third quarter. At the top of the heap, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners dropped the biggest stake of all the hedgies watched by Insider Monkey, worth an estimated $5.5 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund said goodbye to about $0.6 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to SK Telecom Co., Ltd. (NYSE:SKM). We will take a look at The Liberty SiriusXM Group (NASDAQ:LSXMK), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Korea Electric Power Corporation (NYSE:KEP), and Kansas City Southern (NYSE:KSU). This group of stocks’ market valuations resemble SKM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LSXMK | 54 | 3333126 | 5 |
| BMRN | 49 | 1937452 | 0 |
| KEP | 3 | 45485 | -4 |
| KSU | 40 | 414826 | 7 |
| Average | 36.5 | 1432722 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $1433 million. That figure was $135 million in SKM’s case. The Liberty SiriusXM Group (NASDAQ:LSXMK) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 3 bullish hedge fund positions. SK Telecom Co., Ltd. (NYSE:SKM) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately SKM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SKM investors were disappointed as the stock returned -27% 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 in Q1.
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.
