Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Millicom International Cellular S.A. (NASDAQ:TIGO).
Millicom International Cellular S.A. (NASDAQ:TIGO) was in 5 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 8. TIGO shareholders have witnessed a decrease in enthusiasm from smart money of late. There were 6 hedge funds in our database with TIGO holdings at the end of December. Our calculations also showed that TIGO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Jason Ader of Cumberland Associates / Springowl Associates
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's go over the latest hedge fund action regarding Millicom International Cellular S.A. (NASDAQ:TIGO).
Do Hedge Funds Think TIGO Is A Good Stock To Buy Now?
At first quarter's end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in TIGO a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of Millicom International Cellular S.A. (NASDAQ:TIGO), with a stake worth $23.1 million reported as of the end of March. Trailing GAMCO Investors was Renaissance Technologies, which amassed a stake valued at $17.7 million. Cumberland Associates / Springowl Associates, Citadel Investment Group, and Arrowstreet 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 Cumberland Associates / Springowl Associates allocated the biggest weight to Millicom International Cellular S.A. (NASDAQ:TIGO), around 3.91% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.2 percent of its 13F equity portfolio to TIGO.
Since Millicom International Cellular S.A. (NASDAQ:TIGO) has experienced declining sentiment from hedge fund managers, we can see that there exists a select few fund managers that decided to sell off their entire stakes in the first quarter. It's worth mentioning that Jeffrey Bronchick's Cove Street Capital dumped the biggest investment of the 750 funds tracked by Insider Monkey, valued at an estimated $32.3 million in stock. Israel Englander's fund, Millennium Management, also said goodbye to its stock, about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest fell by 1 funds in the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Millicom International Cellular S.A. (NASDAQ:TIGO) but similarly valued. These stocks are Progyny, Inc. (NASDAQ:PGNY), New Relic Inc (NYSE:NEWR), EnerSys (NYSE:ENS), Umpqua Holdings Corp (NASDAQ:UMPQ), Brighthouse Financial, Inc. (NASDAQ:BHF), Glaukos Corporation (NYSE:GKOS), and Spire Inc. (NYSE:SR). All of these stocks' market caps are closest to TIGO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PGNY,26,221476,2 NEWR,27,1141779,-3 ENS,28,119582,4 UMPQ,25,245140,2 BHF,28,539727,-5 GKOS,18,47095,5 SR,9,20905,-6 Average,23,333672,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $42 million in TIGO's case. EnerSys (NYSE:ENS) is the most popular stock in this table. On the other hand Spire Inc. (NYSE:SR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Millicom International Cellular S.A. (NASDAQ:TIGO) is even less popular than SR. Our overall hedge fund sentiment score for TIGO is 22.8. 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. Hedge funds dodged a bullet by taking a bearish stance towards TIGO. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th but managed to beat the market again by 6.1 percentage points. Unfortunately TIGO wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); TIGO investors were disappointed as the stock returned 4.2% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.