In this article we will take a look at whether hedge funds think Shinhan Financial Group Co., Ltd. (NYSE:SHG) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Shinhan Financial Group Co., Ltd. (NYSE:SHG) worth your attention right now? Investors who are in the know are becoming more confident. The number of long hedge fund positions advanced by 2 lately. Our calculations also showed that SHG 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.
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 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 S&P 500 ETFs by 58 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 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the latest hedge fund action surrounding Shinhan Financial Group Co., Ltd. (NYSE:SHG).
Hedge fund activity in Shinhan Financial Group Co., Ltd. (NYSE:SHG)
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the fourth quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in SHG a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Pzena Investment Management held the most valuable stake in Shinhan Financial Group Co., Ltd. (NYSE:SHG), which was worth $4.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $1.8 million worth of shares. D E Shaw, Renaissance Technologies, and Millennium Management 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 Pzena Investment Management allocated the biggest weight to Shinhan Financial Group Co., Ltd. (NYSE:SHG), around 0.03% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to SHG.
As one would reasonably expect, some big names were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, created the biggest position in Shinhan Financial Group Co., Ltd. (NYSE:SHG). D E Shaw had $1.5 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.6 million position during the quarter. The only other fund with a new position in the stock is Israel Englander’s Millennium Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Shinhan Financial Group Co., Ltd. (NYSE:SHG) but similarly valued. These stocks are Discover Financial Services (NYSE:DFS), International Flavors & Fragrances Inc (NYSE:IFF), Broadridge Financial Solutions, Inc. (NYSE:BR), and Teledyne Technologies Incorporated (NYSE:TDY). This group of stocks’ market valuations are closest to SHG’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 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $330 million. That figure was $8 million in SHG’s case. Discover Financial Services (NYSE:DFS) is the most popular stock in this table. On the other hand Teledyne Technologies Incorporated (NYSE:TDY) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Shinhan Financial Group Co., Ltd. (NYSE:SHG) is even less popular than TDY. Hedge funds dodged a bullet by taking a bearish stance towards SHG. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately SHG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SHG investors were disappointed as the stock returned 5.1% during the second quarter (through the end of May) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.