Where Do Hedge Funds Stand On China Unicom (Hong Kong) Limited (CHU)?

Abigail Fisher
·6 min read

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on China Unicom (Hong Kong) Limited (NYSE:CHU).

Is China Unicom (Hong Kong) Limited (NYSE:CHU) a buy, sell, or hold? Prominent investors were reducing their bets on the stock. The number of bullish hedge fund bets shrunk by 2 in recent months. China Unicom (Hong Kong) Limited (NYSE:CHU) was in 6 hedge funds' portfolios at the end of September. The all time high for this statistics is 12. Our calculations also showed that CHU isn't 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). There were 8 hedge funds in our database with CHU positions at the end of the second quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 let's review the latest hedge fund action surrounding China Unicom (Hong Kong) Limited (NYSE:CHU).

What does smart money think about China Unicom (Hong Kong) Limited (NYSE:CHU)?

At Q3's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CHU over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of China Unicom (Hong Kong) Limited (NYSE:CHU), with a stake worth $45 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $3.6 million. Citadel Investment Group, Two Sigma Advisors, and Citadel Investment Group 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 Renaissance Technologies allocated the biggest weight to China Unicom (Hong Kong) Limited (NYSE:CHU), around 0.04% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to CHU.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Paloma Partners. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified CHU as a viable investment and initiated a position in the stock.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as China Unicom (Hong Kong) Limited (NYSE:CHU) but similarly valued. We will take a look at AmerisourceBergen Corporation (NYSE:ABC), Simon Property Group, Inc (NYSE:SPG), Entergy Corporation (NYSE:ETR), Immunomedics, Inc. (NASDAQ:IMMU), Incyte Corporation (NASDAQ:INCY), Ameren Corporation (NYSE:AEE), and Delta Air Lines, Inc. (NYSE:DAL). This group of stocks' market caps match CHU's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABC,45,477155,5 SPG,25,313077,-2 ETR,27,786556,-5 IMMU,81,6943238,33 INCY,35,3821456,6 AEE,20,521323,1 DAL,43,753247,4 Average,39.4,1945150,6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.4 hedge funds with bullish positions and the average amount invested in these stocks was $1945 million. That figure was $50 million in CHU's case. Immunomedics, Inc. (NASDAQ:IMMU) is the most popular stock in this table. On the other hand Ameren Corporation (NYSE:AEE) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks China Unicom (Hong Kong) Limited (NYSE:CHU) is even less popular than AEE. Our overall hedge fund sentiment score for CHU is 18. 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 CHU. 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 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately CHU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CHU investors were disappointed as the stock returned -4.7% since the end of the third quarter (through 11/27) 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 2020.

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

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