Were Hedge Funds Right About Dumping TIM Participacoes SA (TSU) ?

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was TIM Participacoes SA (NYSE:TSU).

TIM Participacoes SA (NYSE:TSU) has seen a decrease in hedge fund interest recently. TSU was in 12 hedge funds’ portfolios at the end of the second quarter of 2019. There were 16 hedge funds in our database with TSU positions at the end of the previous quarter. Our calculations also showed that TSU isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

Steven Tananbaum - GoldenTree Asset Management

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to analyze the key hedge fund action surrounding TIM Participacoes SA (NYSE:TSU).

Hedge fund activity in TIM Participacoes SA (NYSE:TSU)

At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TSU over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Among these funds, AQR Capital Management held the most valuable stake in TIM Participacoes SA (NYSE:TSU), which was worth $112.3 million at the end of the second quarter. On the second spot was Paulson & Co which amassed $74.9 million worth of shares. Moreover, Renaissance Technologies, GoldenTree Asset Management, and NWI Management were also bullish on TIM Participacoes SA (NYSE:TSU), allocating a large percentage of their portfolios to this stock.

Due to the fact that TIM Participacoes SA (NYSE:TSU) has experienced falling interest from the smart money, it’s safe to say that there lies a certain “tier” of hedgies who sold off their positions entirely in the second quarter. Intriguingly, Steve Cohen’s Point72 Asset Management said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $7.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $5.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds in the second quarter.

Let’s go over hedge fund activity in other stocks similar to TIM Participacoes SA (NYSE:TSU). We will take a look at Medical Properties Trust, Inc. (NYSE:MPW), YPF Sociedad Anonima (NYSE:YPF), Axalta Coating Systems Ltd (NYSE:AXTA), and Insulet Corporation (NASDAQ:PODD). This group of stocks’ market valuations match TSU’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MPW 13 169784 0
YPF 15 70155 -6
AXTA 41 2287075 -2
PODD 24 390580 4
Average 23.25 729399 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $729 million. That figure was $306 million in TSU’s case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand Medical Properties Trust, Inc. (NYSE:MPW) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks TIM Participacoes SA (NYSE:TSU) is even less popular than MPW. Hedge funds dodged a bullet by taking a bearish stance towards TSU. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TSU wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TSU investors were disappointed as the stock returned -4.1% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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