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HSBC Holdings plc (HSBC): Hedge Funds Cashing Out

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards HSBC Holdings plc (NYSE:HSBC).

HSBC Holdings plc (NYSE:HSBC) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. HSBC was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. There were 18 hedge funds in our database with HSBC holdings at the end of the previous quarter. Our calculations also showed that HSBC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

To the average investor there are a multitude of signals stock traders use to assess publicly traded companies. Two of the less utilized signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the top investment managers can outperform the broader indices by a healthy margin (see the details here).

TUDOR INVESTMENT CORP

Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 largest producers of bauxite to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the new hedge fund action regarding HSBC Holdings plc (NYSE:HSBC).

How are hedge funds trading HSBC Holdings plc (NYSE:HSBC)?

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HSBC over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the number one position in HSBC Holdings plc (NYSE:HSBC). Renaissance Technologies has a $251.8 million position in the stock, comprising 0.2% of its 13F portfolio. On Renaissance Technologies’s heels is Segantii Capital, managed by Simon Sadler, which holds a $35.6 million position; 2.8% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish encompass Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Matthew Hulsizer’s PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Segantii Capital allocated the biggest weight to HSBC Holdings plc (NYSE:HSBC), around 2.84% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, earmarking 2.78 percent of its 13F equity portfolio to HSBC.

Because HSBC Holdings plc (NYSE:HSBC) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of fund managers who sold off their full holdings in the first quarter. Intriguingly, Clint Carlson’s Carlson Capital said goodbye to the largest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $32.4 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dropped about $3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 4 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as HSBC Holdings plc (NYSE:HSBC) but similarly valued. These stocks are Philip Morris International Inc. (NYSE:PM), Thermo Fisher Scientific Inc. (NYSE:TMO), AbbVie Inc (NYSE:ABBV), and Paypal Holdings Inc (NASDAQ:PYPL). This group of stocks’ market values resemble HSBC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PM 48 2541197 -9
TMO 80 3187947 7
ABBV 81 5118264 10
PYPL 118 4659097 -8
Average 81.75 3876626 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 81.75 hedge funds with bullish positions and the average amount invested in these stocks was $3877 million. That figure was $379 million in HSBC’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Philip Morris International Inc. (NYSE:PM) is the least popular one with only 48 bullish hedge fund positions. Compared to these stocks HSBC Holdings plc (NYSE:HSBC) is even less popular than PM. Hedge funds dodged a bullet by taking a bearish stance towards HSBC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately HSBC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); HSBC investors were disappointed as the stock returned -14.1% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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

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