Were hedge funds right to get rid of Tencent Music Entertainment Group (TME)?


In this article, we’ll use hedge fund sentiment as a tool and determine whether Tencent Music Entertainment Group (NYSE:TME) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do this because hedge funds and other elite investors have many Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is no dearth of articles on failed hedge fund investments and it is a fact that hedge fund picks don’t beat the market 100% of the time, but their consensus picks have historically been very performed well and outperformed the market after adjusting for risk.

Tencent Music Entertainment Group (NYSE:TME) was in 35 hedge fund portfolios at the end of the second quarter of 2021. The all-time high for this statistic is 63. TME shareholders recently saw a decline in activity for the world’s largest hedge funds. There were 63 hedge funds in our database with TME holdings at the end of March. Our calculations also showed that TME is not one of the 30 most popular stocks among hedge funds (click for Q2 ranking).

Why are we paying the least attention to hedge fund sentiment? Our research has shown that a select group of hedge funds have outperformed S&P 500 ETFs by 79 percentage points since March 2017 (see details here). This is why we believe that hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Gil Simon from SoMa Equity Partners

Gil Simon from SoMa Equity Partners

At Insider Monkey, we scour multiple sources to uncover the next big investing idea. For example, lithium prices have more than doubled over the past year, so we’re looking at stock locations like this. emerging lithium stocks. We go through lists like the 10 best EV stocks to choose the next Tesla which will offer a 10x return. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to the equity pitches at hedge fund conferences. You can subscribe to our free daily newsletter at our home page. Now we’ll take a look at the new hedge fund action surrounding Tencent Music Entertainment Group (NYSE:TME).

Do hedge funds think TME is a good stock to buy now?

At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long on this stock, a change of -44% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options on TME a year ago. So let’s see which hedge funds were among the top stock holders and which hedge funds were making big moves.

Among the funds tracked by Insider Monkey, SoMa Equity Partners, managed by Gil Simon, holds the largest position in Tencent Music Entertainment Group (NYSE: TME). SoMa Equity Partners holds a position of $ 193.5 million in the stock, or 4.1% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, with a position of $ 81.8 million; 0.1% of its 13F portfolio is allocated to society. Other peers with similar optimism include Ian Wace’s Paul Marshall and Marshall Wace LLP, Sanjay Venkat Jeneq Management and that of Ken Griffin Citadelle investment group. In terms of the portfolio weights assigned to each position, Dalton Investments assigned the largest weight to Tencent Music Entertainment Group (NYSE: TME), approximately 8.75% of its 13F portfolio. Jeneq Management is also relatively very bullish on the stock, affecting 6.28% of its 13F equity portfolio at TME.

Given that Tencent Music Entertainment Group (NYSE: TME) has seen bearish sentiment from the overall hedge fund industry, we can see that a few hedgies have chosen to cut their positions completely by the time. end of second trimester. At the top of the heap, Martin Taylor’s Crake Asset Management dropped the largest stake of all hedges tracked by Insider Monkey, valued at around $ 98 million in stocks. the George Yang Fund, Anatole Investment Management, also sold its shares, valued at approximately $ 80.8 million. These moves are interesting, as total hedge fund interest fell by 28 funds at the end of the second quarter.

Now let’s take a look at hedge fund activity in other stocks similar to Tencent Music Entertainment Group (NYSE: TME). These stocks are Etsy Inc (NASDAQ:ETSY), Generac Holdings Inc. (NYSE:GNRC), Slack Technologies Inc (NYSE:JOB), Hormel Foods Corporation (NYSE:HRL), Weyerhaeuser Co. (NYSE:Wyoming), Kansas City South (NYSE:KSU) and Teladoc Health, Inc (NYSE:TDOC). The market capitalizations of this group of stocks are similar to the market capitalization of TME.

[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF position ETSY, 47.1731703, -6 GNRC, 38.594282.2 WORK, 61.5328202.1 HRL, 24.562433, – 2 WY, 39.662871,1 KSU, 61.3303297,12 TDOC, 43.3574007,1 Medium, 44.7.2250971,1.3 [/table]

See the table here if you have formatting problems.

As you can see, these stocks had an average of 44.7 hedge funds with bullish positions and the average amount invested in these stocks was $ 2,251 million. That figure was $ 570 million in the case of TME. Slack Technologies Inc (NYSE:JOB) is the most popular action in this table. On the other hand, Hormel Foods Corporation (NYSE:HRL) is the least popular with only 24 bullish hedge fund positions. Tencent Music Entertainment Group (NYSE: TME) isn’t the least popular stock in this group, but hedge fund interest is still below average. Our overall hedge fund sentiment score for TME is 8.5. 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 negative signal and we prefer to spend our time researching the stocks that hedge funds are accumulating on. Our calculations have shown that top 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 29.6% in 2021 through November 5 and again topped the market by 3.1 percentage points. Unfortunately, TME was not as popular as these 5 stocks (hedge fund sentiment was rather bearish); TME investors were disappointed as the stock has returned -49.6% since the end of June (through 5/11) and has underperformed the market. If you want to invest 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 have already outperformed the market in 2021.

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Disclosure: none. This article originally appeared on Monkey initiate.


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