Is Sumitomo Mitsui Financial Grp, Inc. (SMFG) Going to Burn These Hedge Funds?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) and determine whether hedge funds skillfully traded this stock.

Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) has experienced a decrease in enthusiasm from smart money in recent months. Our calculations also showed that SMFG 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.

To most traders, hedge funds are seen as underperforming, old investment tools of years past. While there are over 8000 funds in operation at present, Our experts hone in on the moguls of this group, around 850 funds. These money managers oversee bulk of the smart money’s total asset base, and by following their best stock picks, Insider Monkey has brought to light a number of investment strategies that have historically defeated the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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. Keeping this in mind we’re going to review the recent hedge fund action surrounding Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG).

What does smart money think about Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG)?

At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SMFG over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SMFG A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), which was worth $43.7 million at the end of the third quarter. On the second spot was LMR Partners which amassed $40.8 million worth of shares. Fisher Asset Management, Arrowstreet Capital, and D E Shaw 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 3.41% of its 13F portfolio. Ellington is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to SMFG.

Due to the fact that Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies that slashed their positions entirely in the first quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest investment of the 750 funds monitored by Insider Monkey, worth an estimated $0.2 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund sold off about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the first quarter.

Let’s also examine 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 Banco Bradesco SA (NYSE:BBD), Barrick Gold Corporation (NYSE:GOLD), Las Vegas Sands Corp. (NYSE:LVS), and Prudential Public Limited Company (NYSE:PUK). This group of stocks’ market valuations resemble SMFG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBD 15 246087 -3
GOLD 54 1756373 3
LVS 42 1186415 5
PUK 6 43832 0
Average 29.25 808177 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $808 million. That figure was $105 million in SMFG’s case. Barrick Gold Corporation (NYSE:GOLD) 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 6 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. 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 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately SMFG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SMFG investors were disappointed as the stock returned 17.3% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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