Were hedge funds right to pile up in Tencent Music Entertainment Group (TME)?
The last 13F reporting period has passed and Insider Monkey is once again at the forefront when it comes to using this data gold mine. Insider Monkey has completed 866 13F cases submitted by hedge funds and leading investors. These documents show the portfolio positions of these funds as of March 31, 2020. What do these smart investors think of Tencent Music Entertainment Group (NYSE: TME)?
Tencent Music Entertainment Group (NYSE: TME) has seen an increase in support from the world’s most elite fund managers in recent months. Tencent Music Entertainment Group (NYSE: TME) was listed in 63 hedge fund portfolios at the end of the first quarter of 2021. The all-time high for this statistic was previously 30. This means the number of hedge fund positions in this stock has increased. currently. is at its highest level. Our calculations also showed that TME is not among the top 30 most popular stocks among hedge funds (click for Q1 rank).
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Gil Simon from SoMa Equity Partners
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Do hedge funds think TME is a good stock to buy now?
At the end of the first quarter, a total of 63 of the hedge funds tracked by Insider Monkey held long positions in this security, a change of 142% from the fourth quarter of 2020. The graph below shows the number of hedge funds with an uptrend. position in TME for the last 23 quarters. So let’s see which hedge funds were among the top stock holders and which hedge funds were making big moves.
According to publicly available data on hedge funds and institutional investors compiled by Insider Monkey, DE Shaw, managed by DE Shaw, holds the largest position in Tencent Music Entertainment Group (NYSE: TME). DE Shaw has a position of $ 351 million in the stock, comprising 0.3% of its 13F portfolio. The second largest stake is held by Gil Simon of SoMa Equity Partners, with a position of $ 245.9 million; 5.4% of its 13F portfolio is allocated to securities. Some other hedge funds and institutional investors that hold long positions are Renaissance Technologies, Crake Asset Management of Martin Taylor and Millennium Management of Israel Englander. In terms of the portfolio weights assigned to each position, Infini Capital assigned the largest weight to Tencent Music Entertainment Group (NYSE: TME), approximately 16.16% of its 13F portfolio. Voleon Capital is also relatively very bullish on the stock, allocating 14.08% of its 13F equity portfolio to TME.
Therefore, the key fund managers were themselves innovating. Element Capital Management, managed by Jeffrey Talpins, has been the most valuable position in Tencent Music Entertainment Group (NYSE: TME). Element Capital Management had invested $ 46.5 million in the company at the end of the quarter. Josh Resnick’s Jericho Capital Asset Management also invested $ 35.7 million in the stock during the quarter. Other funds with new equity positions are Jeneq Management by Sanjay Venkat, Ben Levine, LMR Partners by Andrew Manuel and Stefan Renold, and Soros Fund Management by George Soros.
Now let’s review hedge fund activity in other stocks – not necessarily in the same industry as Tencent Music Entertainment Group (NYSE: TME) but of similar value. These stocks are Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN), Hilton Worldwide Holdings Inc (NYSE: HLT), Corning Incorporated (NYSE: GLW), Zimmer Biomet Holdings Inc (NYSE: ZBH), Peloton Interactive, Inc. (NASDAQ: PTON), Marvell Technology, Inc. (NASDAQ: MRVL) and Orange SA (NYSE: ORAN). The market values of this group of shares resemble the market value of TME.
[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF position ALXN, 77.6915184.0 HLT, 47.5139343, -13 GLW, 32.507110, -7 ZBH, 50.2151143, -3 PTON, 64 3963327,1 MRVL, 33 683159, -7 ORAN, 2 10613, -1 Medium 43.6 2767126, -4.3 [/table]
Check the table here if you have formatting issues.
As you can see, these stocks had an average of 43.6 hedge funds with bullish positions and the average amount invested in these stocks was $ 2,767 million. That figure was $ 1,771 million in the case of TME. Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) is the most popular stock in this table. On the other hand, Orange SA (NYSE: ORAN) is the least popular with only 2 bullish hedge fund positions. Tencent Music Entertainment Group (NYSE: TME) isn’t that group’s most popular stock, but hedge fund interest is still above average. Our overall hedge fund sentiment score for TME is 80.7. Stocks with a higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal, but we prefer to spend our time researching the stocks on which hedge funds are accumulating. Our calculations showed that the 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020 and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.8% in 2021 through August 6 and again beat the market by 6.7 percentage points. Unfortunately, TME was not as popular as these 5 stocks and the hedge funds that bet on TME were disappointed as the stock returned -49% since the end of March (through 8/6) and underperformed on Marlet. If you want to invest in large cap stocks with huge upside potential, you should check out the 5 most popular stocks among hedge funds, as many of these stocks have already outperformed the market since 2019.
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Disclosure: none. This article originally appeared on Insider Monkey.