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Were Hedge Funds Right About Warming Up To T-Mobile US, Inc. (TMUS)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded T-Mobile US, Inc. (NASDAQ:TMUS) and determine whether the smart money was really smart about this stock.

T-Mobile US, Inc. (NASDAQ:TMUS) has seen an increase in enthusiasm from smart money in recent months. TMUS was in 65 hedge funds’ portfolios at the end of the first quarter of 2020. There were 61 hedge funds in our database with TMUS positions at the end of the previous quarter. Our calculations also showed that TMUS 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Tannenbaum of Fir Tree

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the fresh hedge fund action encompassing T-Mobile US, Inc. (NASDAQ:TMUS).

How have hedgies been trading T-Mobile US, Inc. (NASDAQ:TMUS)?

At the end of the first quarter, a total of 65 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TMUS over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in T-Mobile US, Inc. (NASDAQ:TMUS), which was worth $273.8 million at the end of the third quarter. On the second spot was Jericho Capital Asset Management which amassed $110.8 million worth of shares. Viking Global, Pentwater Capital Management, and Fir Tree 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 Tekne Capital Management allocated the biggest weight to T-Mobile US, Inc. (NASDAQ:TMUS), around 15.79% of its 13F portfolio. Jericho Capital Asset Management is also relatively very bullish on the stock, designating 8.91 percent of its 13F equity portfolio to TMUS.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Jericho Capital Asset Management, managed by Josh Resnick, established the biggest position in T-Mobile US, Inc. (NASDAQ:TMUS). Jericho Capital Asset Management had $110.8 million invested in the company at the end of the quarter. Andreas Halvorsen’s Viking Global also initiated a $105.2 million position during the quarter. The other funds with brand new TMUS positions are Jeffrey Altman’s Owl Creek Asset Management, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management, and Brandon Haley’s Holocene Advisors.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as T-Mobile US, Inc. (NASDAQ:TMUS) but similarly valued. We will take a look at Altria Group Inc (NYSE:MO), Mondelez International Inc (NASDAQ:MDLZ), HDFC Bank Limited (NYSE:HDB), and General Electric Company (NYSE:GE). All of these stocks’ market caps match TMUS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MO 46 1439983 -8
MDLZ 54 2218156 4
HDB 38 1852582 -1
GE 58 3531845 -2
Average 49 2260642 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 49 hedge funds with bullish positions and the average amount invested in these stocks was $2261 million. That figure was $1646 million in TMUS’s case. General Electric Company (NYSE:GE) is the most popular stock in this table. On the other hand HDFC Bank Limited (NYSE:HDB) is the least popular one with only 38 bullish hedge fund positions. Compared to these stocks T-Mobile US, Inc. (NASDAQ:TMUS) is more popular among hedge funds. 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on TMUS as the stock returned 31.3% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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