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Were Hedge Funds Right About Souring On Nokia Corporation (NOK)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Nokia Corporation (NYSE:NOK) in this article.

Is Nokia Corporation (NYSE:NOK) a good investment now? Investors who are in the know are turning less bullish. The number of bullish hedge fund bets were cut by 8 in recent months. 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 below for Q3 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a multitude of tools shareholders employ to assess their stock investments. A couple of the most innovative tools are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the elite fund managers can trounce the S&P 500 by a healthy margin (see the details here).

Ken Heebner of Capital Growth Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 view the recent hedge fund action regarding Nokia Corporation (NYSE:NOK).

Hedge fund activity in Nokia Corporation (NYSE:NOK)

At Q4’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in NOK a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Levin Easterly Partners was the largest shareholder of Nokia Corporation (NYSE:NOK), with a stake worth $82.5 million reported as of the end of September. Trailing Levin Easterly Partners was Ariel Investments, which amassed a stake valued at $66.7 million. Capital Growth Management, Citadel Investment Group, and Woodline Partners 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 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.

Because Nokia Corporation (NYSE:NOK) has faced bearish sentiment from the smart money, we can see that there exists a select few hedgies that elected to cut their full holdings last quarter. Intriguingly, John Hurley’s Cavalry Asset Management cut the biggest stake of all the hedgies followed by Insider Monkey, worth about $33.5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $24.6 million worth. These moves are interesting, as total hedge fund interest dropped by 8 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Nokia Corporation (NYSE:NOK). 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). This group of stocks’ market valuations are closest to NOK’s market valuation.

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. Hedge funds dodged a bullet by taking a bearish stance towards NOK. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately NOK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NOK investors were disappointed as the stock returned -34.8% during the same time period 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 most of these stocks already outperformed the market so far in Q1.

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

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