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Were Hedge Funds Right About Selling Mobile TeleSystems Public Joint Stock Company (MBT)?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds’ moves.

Mobile TeleSystems Public Joint Stock Company (NYSE:MBT) shareholders have witnessed a decrease in enthusiasm from smart money recently. Our calculations also showed that MBT isn’t among the 30 most popular stocks among hedge funds (see 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MBT_oct2019

Unlike this former hedge fund manager who is convinced Dow will soar past 40000, 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 view the fresh hedge fund action surrounding Mobile TeleSystems Public Joint Stock Company (NYSE:MBT).

What does smart money think about Mobile TeleSystems Public Joint Stock Company (NYSE:MBT)?

At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MBT over the last 16 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Howard Marks OAKTREE CAPITAL MANAGEMENT

More specifically, Renaissance Technologies was the largest shareholder of Mobile TeleSystems Public Joint Stock Company (NYSE:MBT), with a stake worth $276.9 million reported as of the end of March. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $149.2 million. Millennium Management, Citadel Investment Group, and Oaktree Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Since Mobile TeleSystems Public Joint Stock Company (NYSE:MBT) has faced bearish sentiment from the smart money, logic holds that there were a few hedge funds that elected to cut their full holdings by the end of the second quarter. At the top of the heap, Mike Vranos’s Ellington sold off the largest investment of all the hedgies tracked by Insider Monkey, comprising close to $0.2 million in stock. David Harding’s fund, Winton Capital Management, also said goodbye to its stock, about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks similar to Mobile TeleSystems Public Joint Stock Company (NYSE:MBT). We will take a look at Voya Financial Inc (NYSE:VOYA), US Foods Holding Corp. (NYSE:USFD), Gildan Activewear Inc (NYSE:GIL), and News Corp (NASDAQ:NWSA). All of these stocks’ market caps match MBT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VOYA 43 1323923 -2
USFD 39 1399158 -1
GIL 24 551244 -3
NWSA 23 351093 2
Average 32.25 906355 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $906 million. That figure was $449 million in MBT’s case. Voya Financial Inc (NYSE:VOYA) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWSA) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Mobile TeleSystems Public Joint Stock Company (NYSE:MBT) is even less popular than NWSA. Hedge funds dodged a bullet by taking a bearish stance towards MBT. 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 MBT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MBT investors were disappointed as the stock returned -6.4% 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.

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