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Were Hedge Funds Right About Nokia Corporation (NOK)?

Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Nokia Corporation (NYSE:NOK).

Is Nokia Corporation (NYSE:NOK) a buy here? Investors who are in the know are selling. The number of long hedge fund positions were cut by 8 lately. Our calculations also showed that NOK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). NOK was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 24 hedge funds in our database with NOK positions at the end of the previous quarter.

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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Heebner of Capital Growth Management

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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 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 check out the key hedge fund action surrounding Nokia Corporation (NYSE:NOK).

How are hedge funds trading Nokia Corporation (NYSE:NOK)?

Heading into the first quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NOK over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Nokia Corporation (NYSE:NOK) was held by Levin Easterly Partners, which reported holding $82.5 million worth of stock at the end of September. It was followed by Ariel Investments with a $66.7 million position. Other investors bullish on the company included Capital Growth Management, Citadel Investment Group, and Woodline Partners. In terms of the portfolio weights assigned to each position Levin Easterly Partners allocated the biggest weight to Nokia Corporation (NYSE:NOK), around 2.32% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, setting aside 2.31 percent of its 13F equity portfolio to NOK.

Due to the fact that Nokia Corporation (NYSE:NOK) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedgies that elected to cut their positions entirely in the third quarter. It’s worth mentioning that John Hurley’s Cavalry Asset Management sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, comprising about $33.5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $24.6 million worth. These transactions are interesting, as total hedge fund interest was cut by 8 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nokia Corporation (NYSE:NOK) but similarly valued. We will take a look at Skyworks Solutions Inc (NASDAQ:SWKS), CDW Corporation (NASDAQ:CDW), CBRE Group, Inc. (NYSE:CBRE), and Hewlett Packard Enterprise Company (NYSE:HPE). All of these stocks’ market caps resemble NOK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SWKS 43 1178499 17
CDW 30 1085374 0
CBRE 30 1499210 -1
HPE 41 1048549 10
Average 36 1202908 6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1203 million. That figure was $228 million in NOK’s case. Skyworks Solutions Inc (NASDAQ:SWKS) is the most popular stock in this table. On the other hand CDW Corporation (NASDAQ:CDW) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Nokia Corporation (NYSE:NOK) is even less popular than CDW. 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 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. A small number of hedge funds were also right about betting on NOK, though not to the same extent, as the stock returned -3% during the same time period and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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