Where Do Hedge Funds Stand On T-Mobile US, Inc. (TMUS)?

Is T-Mobile US, Inc. (NASDAQ:TMUS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

T-Mobile US, Inc. (NASDAQ:TMUS) was in 94 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 113. TMUS investors should pay attention to a decrease in enthusiasm from smart money of late. There were 113 hedge funds in our database with TMUS holdings at the end of June. Our calculations also showed that TMUS ranked #21 among the 30 most popular stocks among hedge funds (click for Q3 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Jacob Rothschild - RIT Capital

Jacob Rothschild of RIT Capital Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to go over the key hedge fund action surrounding T-Mobile US, Inc. (NASDAQ:TMUS).

What have hedge funds been doing with T-Mobile US, Inc. (NASDAQ:TMUS)?

At the end of September, a total of 94 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the second quarter of 2020. By comparison, 64 hedge funds held shares or bullish call options in TMUS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Viking Global held the most valuable stake in T-Mobile US, Inc. (NASDAQ:TMUS), which was worth $922.9 million at the end of the third quarter. On the second spot was Egerton Capital Limited which amassed $879.5 million worth of shares. Appaloosa Management LP, Citadel Investment Group, and Farallon Capital 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 BlueDrive Global Investors allocated the biggest weight to T-Mobile US, Inc. (NASDAQ:TMUS), around 16.62% of its 13F portfolio. Crake Asset Management is also relatively very bullish on the stock, designating 12.89 percent of its 13F equity portfolio to TMUS.

Seeing as T-Mobile US, Inc. (NASDAQ:TMUS) has faced falling interest from the smart money, logic holds that there is a sect of hedgies who sold off their positions entirely heading into Q4. Interestingly, Simon Sadler’s Segantii Capital dropped the largest investment of the 750 funds followed by Insider Monkey, comprising an estimated $180.4 million in stock, and Daniel S. Och’s OZ Management was right behind this move, as the fund dropped about $92.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 19 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to T-Mobile US, Inc. (NASDAQ:TMUS). We will take a look at Accenture Plc (NYSE:ACN), AstraZeneca plc (NASDAQ:AZN), Eli Lilly and Company (NYSE:LLY), Medtronic plc (NYSE:MDT), NextEra Energy, Inc. (NYSE:NEE), Bristol Myers Squibb Company (NYSE:BMY), and Chevron Corporation (NYSE:CVX). All of these stocks’ market caps are closest to TMUS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACN 46 1148986 2
AZN 33 2259713 -5
LLY 60 2529803 9
MDT 62 2975696 4
NEE 64 2738763 9
BMY 124 7566836 -12
CVX 43 1247481 -7
Average 61.7 2923897 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 61.7 hedge funds with bullish positions and the average amount invested in these stocks was $2924 million. That figure was $7539 million in TMUS’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand AstraZeneca plc (NASDAQ:AZN) is the least popular one with only 33 bullish hedge fund positions. T-Mobile US, Inc. (NASDAQ:TMUS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TMUS is 44.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. Hedge funds were also right about betting on TMUS as the stock returned 11.8% since the end of Q3 (through 11/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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