At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards China Mobile Limited (NYSE:CHL).
Is CHL a good stock to buy now? Hedge funds were taking a bullish view. The number of long hedge fund positions rose by 1 recently. China Mobile Limited (NYSE:CHL) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 25. Our calculations also showed that CHL isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a gander at the new hedge fund action encompassing China Mobile Limited (NYSE:CHL).
Do Hedge Funds Think CHL Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHL over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in China Mobile Limited (NYSE:CHL) was held by Renaissance Technologies, which reported holding $327.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $32.6 million position. Other investors bullish on the company included Ariel Investments, Point72 Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to China Mobile Limited (NYSE:CHL), around 0.33% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, dishing out 0.25 percent of its 13F equity portfolio to CHL.
As industrywide interest jumped, some big names were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in China Mobile Limited (NYSE:CHL). Point72 Asset Management had $13.3 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital and Thomas Bailard’s Bailard Inc.
Let’s also examine hedge fund activity in other stocks similar to China Mobile Limited (NYSE:CHL). These stocks are Texas Instruments Incorporated (NASDAQ:TXN), BHP Group (NYSE:BHP), Charter Communications, Inc. (NASDAQ:CHTR), Sanofi (NASDAQ:SNY), Lowe’s Companies, Inc. (NYSE:LOW), Linde plc (NYSE:LIN), and Shopify Inc (NYSE:SHOP). All of these stocks’ market caps are similar to CHL’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.9 hedge funds with bullish positions and the average amount invested in these stocks was $4810 million. That figure was $401 million in CHL’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks China Mobile Limited (NYSE:CHL) is even less popular than BHP. Our overall hedge fund sentiment score for CHL is 18. 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. Hedge funds dodged a bullet by taking a bearish stance towards CHL. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th but managed to beat the market again by 16.2 percentage points. Unfortunately CHL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CHL investors were disappointed as the stock returned -8.8% since the end of the third quarter (through 12/8) 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.
Disclosure: None. This article was originally published at Insider Monkey.