Is T-Mobile US, Inc. (TMUS) A Good Stock To Buy?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards T-Mobile US, Inc. (NASDAQ:TMUS).

Is TMUS a good stock to buy? T-Mobile US, Inc. (NASDAQ:TMUS) was in 98 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 113. TMUS investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. There were 103 hedge funds in our database with TMUS holdings at the end of December. Our calculations also showed that TMUS ranked 22nd among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a peek at the fresh hedge fund action encompassing T-Mobile US, Inc. (NASDAQ:TMUS).

Do Hedge Funds Think TMUS Is A Good Stock To Buy Now?

At the end of March, a total of 98 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TMUS over the last 23 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

More specifically, Viking Global was the largest shareholder of T-Mobile US, Inc. (NASDAQ:TMUS), with a stake worth $1288.6 million reported as of the end of March. Trailing Viking Global was Egerton Capital Limited, which amassed a stake valued at $904.8 million. Berkshire Hathaway, D1 Capital Partners, and Appaloosa Management LP 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 Fernbridge Capital Management allocated the biggest weight to T-Mobile US, Inc. (NASDAQ:TMUS), around 15.06% of its 13F portfolio. Tekne Capital Management is also relatively very bullish on the stock, setting aside 12.72 percent of its 13F equity portfolio to TMUS.

Judging by the fact that T-Mobile US, Inc. (NASDAQ:TMUS) has faced falling interest from the smart money, it’s safe to say that there were a few fund managers who sold off their full holdings last quarter. At the top of the heap, Josh Resnick’s Jericho Capital Asset Management cut the largest position of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $142 million in stock, and Michael Pausic’s Foxhaven Asset Management was right behind this move, as the fund dropped about $111.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 5 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as T-Mobile US, Inc. (NASDAQ:TMUS) but similarly valued. We will take a look at Citigroup Inc. (NYSE:C), Royal Dutch Shell plc (NYSE:RDS), Honeywell International Inc. (NASDAQ:HON), QUALCOMM, Incorporated (NASDAQ:QCOM), The Boeing Company (NYSE:BA), NextEra Energy, Inc. (NYSE:NEE), and United Parcel Service, Inc. (NYSE:UPS). This group of stocks’ market valuations match TMUS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
C 90 6938143 -5
RDS 36 2190186 2
HON 56 1731346 11
QCOM 73 2765985 -12
BA 59 1437584 4
NEE 63 2725995 2
UPS 44 1346598 -4
Average 60.1 2733691 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 60.1 hedge funds with bullish positions and the average amount invested in these stocks was $2734 million. That figure was $9056 million in TMUS’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand Royal Dutch Shell plc (NYSE:RDS) is the least popular one with only 36 bullish hedge fund positions. Compared to these stocks T-Mobile US, Inc. (NASDAQ:TMUS) is more popular among hedge funds. Our overall hedge fund sentiment score for TMUS is 76. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on TMUS as the stock returned 16% since the end of March (through 6/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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