It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized in financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG).
Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG) has experienced a decrease in hedge fund interest in recent months. SHG was in 5 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with SHG holdings at the end of the previous quarter. 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 Wisconsin Energy Corporation (NYSE:WEC), Nielsen Hldg NV (NYSE:NLSN), and M&T Bank Corporation (NYSE:MTB) to gather more data points.
According to most shareholders, hedge funds are perceived as unimportant, old investment tools of the past. While there are more than an 8000 funds with their doors open at present, Our experts look at the elite of this club, around 700 funds. It is estimated that this group of investors oversee most of all hedge funds’ total asset base, and by keeping track of their finest stock picks, Insider Monkey has figured out a few investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, let’s analyze the latest action encompassing Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG).
How have hedgies been trading Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG)?
At the Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Orbis Investment Management, managed by William B. Gray, holds the largest position in Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG). Orbis Investment Management has a $3.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Ken Fisher’s Fisher Asset Management, with a $2.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish contain Richard S. Pzena’s Pzena Investment Management, D. E. Shaw’s D E Shaw and David Dreman’s Dreman Value Management.
Since Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG) has faced a declining sentiment from the smart money, it’s easy to see that there lies a certain “tier” of hedge funds that elected to cut their full holdings heading into Q4. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $6.9 million in stock. Jim Simons’ Renaissance Technologies, also sold off its stock, about $2.2 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG). We will take a look at Wisconsin Energy Corporation (NYSE:WEC), Nielsen Hldg NV (NYSE:NLSN), M&T Bank Corporation (NYSE:MTB), and Micron Technology, Inc. (NASDAQ:MU). This group of stocks’ market valuations resemble SHG’s market valuation.
|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 31 hedge funds with bullish positions and the average amount invested in these stocks was $807 million. That figure was just $7 million in SHG’s case. Micron Technology, Inc. (NASDAQ:MU) is the most popular stock in this table, while Wisconsin Energy Corporation (NYSE:WEC) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks, Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG) is even less popular than WEC. 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.