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Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Cable One Inc (NYSE:CABO).
Cable One Inc (NYSE:CABO) investors should pay attention to an increase in hedge fund sentiment recently. CABO was in 19 hedge funds' portfolios at the end of December. There were 14 hedge funds in our database with CABO holdings at the end of the previous quarter. Our calculations also showed that CABO isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 41 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.
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Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind we're going to analyze the recent hedge fund action surrounding Cable One Inc (NYSE:CABO).
What have hedge funds been doing with Cable One Inc (NYSE:CABO)?
At Q4's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in CABO 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, Renaissance Technologies held the most valuable stake in Cable One Inc (NYSE:CABO), which was worth $436 million at the end of the third quarter. On the second spot was Wallace Capital Management which amassed $77 million worth of shares. AQR Capital Management, GLG Partners, and AltraVue 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 Wallace Capital Management allocated the biggest weight to Cable One Inc (NYSE:CABO), around 10.57% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, designating 4.71 percent of its 13F equity portfolio to CABO.
As aggregate interest increased, specific money managers have been driving this bullishness. Paloma Partners, managed by Donald Sussman, established the most outsized position in Cable One Inc (NYSE:CABO). Paloma Partners had $1.1 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang's Weld Capital Management, Ran Pang's Quantamental Technologies, and Jinghua Yan's TwinBeech Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cable One Inc (NYSE:CABO) but similarly valued. These stocks are Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), Pool Corporation (NASDAQ:POOL), The Toro Company (NYSE:TTC), and F5 Networks, Inc. (NASDAQ:FFIV). This group of stocks' market caps are similar to CABO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IONS,27,444148,1 POOL,28,445007,-2 TTC,23,773670,2 FFIV,29,1184887,4 Average,26.75,711928,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $712 million. That figure was $579 million in CABO's case. F5 Networks, Inc. (NASDAQ:FFIV) is the most popular stock in this table. On the other hand The Toro Company (NYSE:TTC) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Cable One Inc (NYSE:CABO) is even less popular than TTC. Hedge funds clearly dropped the ball on CABO as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on CABO as the stock returned -20.3% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.