Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG).
Is SMFG a good stock to buy now? Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) was in 8 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 14. SMFG investors should pay attention to a decrease in enthusiasm from smart money recently. There were 10 hedge funds in our database with SMFG positions at the end of the second quarter. Our calculations also showed that SMFG 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely 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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Keeping this in mind we’re going to take a peek at the fresh hedge fund action encompassing Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG).
How are hedge funds trading Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SMFG over the last 21 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), with a stake worth $48.4 million reported as of the end of September. Trailing Renaissance Technologies was LMR Partners, which amassed a stake valued at $27.9 million. Arrowstreet Capital, D E Shaw, and Athos 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 LMR Partners allocated the biggest weight to Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), around 0.57% of its 13F portfolio. Athos Capital is also relatively very bullish on the stock, designating 0.54 percent of its 13F equity portfolio to SMFG.
Seeing as Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedge funds that elected to cut their full holdings heading into Q4. Intriguingly, Israel Englander’s Millennium Management dumped the biggest stake of the 750 funds monitored by Insider Monkey, worth an estimated $0.1 million in stock, and Greg Eisner’s Engineers Gate Manager was right behind this move, as the fund sold off about $0.1 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) but similarly valued. These stocks are Carvana Co. (NYSE:CVNA), General Mills, Inc. (NYSE:GIS), Electronic Arts Inc. (NASDAQ:EA), Cognizant Technology Solutions Corp (NASDAQ:CTSH), Bank of Montreal (NYSE:BMO), BCE Inc. (NYSE:BCE), and Prudential Public Limited Company (NYSE:PUK). This group of stocks’ market valuations are similar to SMFG’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 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $1712 million. That figure was $88 million in SMFG’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 4 bullish hedge fund positions. Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SMFG is 23.6. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately SMFG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SMFG investors were disappointed as the stock returned 7% since the end of September (through 12/2) 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 in 2020.
Disclosure: None. This article was originally published at Insider Monkey.