In this article we will take a look at whether hedge funds think Mobile TeleSystems OJSC (NYSE:MBT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Mobile TeleSystems OJSC (NYSE:MBT) has experienced a decrease in enthusiasm from smart money of late. Our calculations also showed that MBT 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, We take a look at lists like the top 15 defense contractors in the world to identify the compounders that are likely to deliver double digit returns. 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. Now let’s check out the fresh hedge fund action surrounding Mobile TeleSystems OJSC (NYSE:MBT).
What have hedge funds been doing with Mobile TeleSystems OJSC (NYSE:MBT)?
Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the fourth quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in MBT a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Mobile TeleSystems OJSC (NYSE:MBT), which was worth $331.9 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $29.1 million worth of shares. Millennium Management, AQR Capital Management, and Cheyne Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cheyne Capital allocated the biggest weight to Mobile TeleSystems OJSC (NYSE:MBT), around 3.33% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.32 percent of its 13F equity portfolio to MBT.
Judging by the fact that Mobile TeleSystems OJSC (NYSE:MBT) has witnessed a decline in interest from the smart money, it’s safe to say that there lies a certain “tier” of funds that elected to cut their entire stakes last quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the largest stake of all the hedgies followed by Insider Monkey, worth about $4 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dropped its stock, about $1.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 4 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Mobile TeleSystems OJSC (NYSE:MBT). We will take a look at Mellanox Technologies, Ltd. (NASDAQ:MLNX), Kilroy Realty Corp (NYSE:KRC), Hill-Rom Holdings, Inc. (NYSE:HRC), and NovoCure Limited (NASDAQ:NVCR). This group of stocks’ market valuations are closest to MBT’s market valuation.
|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 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $791 million. That figure was $378 million in MBT’s case. Mellanox Technologies, Ltd. (NASDAQ:MLNX) is the most popular stock in this table. On the other hand Kilroy Realty Corp (NYSE:KRC) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Mobile TeleSystems OJSC (NYSE:MBT) is even less popular than KRC. 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 13.4% in 2020 through June 22nd but managed to beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on MBT, though not to the same extent, as the stock returned 22% during the second quarter (through June 22nd) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.