Is Mobile TeleSystems OJSC (MBT) Going to Burn These Hedge Funds?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 8.7% through October 26th. Forty percent of the S&P 500 constituents were down more than 10%. The average return of a randomly picked stock in the index is -9.5%. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 25 most popular S&P 500 stocks among hedge funds had an average loss of 8.8%. In this article, we will take a look at what hedge funds think about Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT).

Is Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT) a superb investment right now? Hedge funds are reducing their bets on the stock. The number of long hedge fund bets fell by 3 lately. Our calculations also showed that mbt isn’t among the 30 most popular stocks among hedge funds. MBT was in 11 hedge funds’ portfolios at the end of the third quarter of 2018. There were 14 hedge funds in our database with MBT positions at the end of the previous quarter.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.


Let’s analyze the fresh hedge fund action surrounding Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT).

How are hedge funds trading Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT)?

Heading into the fourth quarter of 2018, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the second quarter of 2018. On the other hand, there were a total of 13 hedge funds with a bullish position in MBT at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with MBT Positions

Among these funds, Renaissance Technologies held the most valuable stake in Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT), which was worth $204.4 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $37.1 million worth of shares. Moreover, Marshall Wace LLP, Citadel Investment Group, and Oaktree Capital Management were also bullish on Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT), allocating a large percentage of their portfolios to this stock.

Because Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT) has experienced falling interest from the smart money, it’s safe to say that there exists a select few hedgies who sold off their positions entirely last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest investment of the 700 funds monitored by Insider Monkey, totaling about $46.1 million in stock, and Simon Sadler’s Segantii Capital was right behind this move, as the fund dropped about $7.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT). We will take a look at KAR Auction Services Inc (NYSE:KAR), Agnico Eagle Mines Limited (NYSE:AEM), VICI Properties Inc. (NYSE:VICI), and Voya Financial Inc (NYSE:VOYA). This group of stocks’ market valuations are similar to MBT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KAR 28 757789 -1
AEM 15 204024 -3
VICI 39 3561661 -5
VOYA 38 1668174 2
Average 30 1547912 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1.55 billion. That figure was $253 million in MBT’s case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand Agnico Eagle Mines Limited (NYSE:AEM) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT) is even less popular than AEM. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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