You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make a proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is China Telecom Corporation Limited (ADR) (NYSE:CHA) going to take off soon? The best stock pickers are becoming less confident. The number of long hedge fund bets were trimmed by 1 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ABB Ltd (ADR) (NYSE:ABB), Credit Suisse Group AG (ADR) (NYSE:CS), and LyondellBasell Industries NV (NYSE:LYB) to gather more data points.
In today’s marketplace there are dozens of tools stock market investors use to grade publicly traded companies. Two of the most underrated tools are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can beat the S&P 500 by a solid amount (see the details here).
Keeping this in mind, let’s analyze the key action regarding China Telecom Corporation Limited (ADR) (NYSE:CHA).
How are hedge funds trading China Telecom Corporation Limited (ADR) (NYSE:CHA)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Simons’s Renaissance Technologies has the biggest position in China Telecom Corporation Limited (ADR) (NYSE:CHA), worth close to $3.2 million, comprising less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Millennium Management, managed by Israel Englander, which holds a $1.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Overdeck and David Siegel’s Two Sigma Advisors.
Seeing as China Telecom Corporation Limited (ADR) (NYSE:CHA) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedge funds that elected to cut their positions entirely by the end of the third quarter. Interestingly, David Costen Haley’s HBK Investments cut the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $0.3 million in stock, and Jane Mendillo’s Harvard Management Co was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 fund by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to China Telecom Corporation Limited (ADR) (NYSE:CHA). These stocks are ABB Ltd (ADR) (NYSE:ABB), Credit Suisse Group AG (ADR) (NYSE:CS), LyondellBasell Industries NV (NYSE:LYB), and Suncor Energy Inc. (USA) (NYSE:SU). This group of stocks’ market caps are closest to CHA’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 25 hedge funds with bullish positions and the average amount invested in these stocks was $1400 million. That figure was $6 million in CHA’s case. LyondellBasell Industries NV (NYSE:LYB) is the most popular stock in this table. On the other hand Credit Suisse Group AG (ADR) (NYSE:CS) is the least popular one. Compared to these stocks China Telecom Corporation Limited (ADR) (NYSE:CHA), with only 4 bullish hedge fund points is even less popular than CS. To comprehend why the smart money isn’t behind this stock more detailed analyses are necessary. It is possible that investors found it overvalued because they were not familiar with the bullish thesis. In any case, further research is required.