In this article you are going to find out whether hedge funds think CenturyLink, Inc. (NYSE:CTL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Hedge fund interest in CenturyLink, Inc. (NYSE:CTL) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Brown & Brown, Inc. (NYSE:BRO), EPAM Systems Inc (NYSE:EPAM), and Hess Corporation (NYSE:HES) to gather more data points. Our calculations also showed that CTL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). 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 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 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.
[caption id="attachment_340075" align="aligncenter" width="400"] Mason Hawkins of Southeastern Asset Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to view the key hedge fund action encompassing CenturyLink, Inc. (NYSE:CTL).
What have hedge funds been doing with CenturyLink, Inc. (NYSE:CTL)?
At Q1's end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in CTL a year ago. With the smart money's sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Mason Hawkins's Southeastern Asset Management has the most valuable position in CenturyLink, Inc. (NYSE:CTL), worth close to $635.7 million, comprising 15.1% of its total 13F portfolio. Coming in second is GLG Partners, managed by Noam Gottesman, which holds a $34.9 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other peers that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Prem Watsa's Fairfax Financial Holdings and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to CenturyLink, Inc. (NYSE:CTL), around 15.12% of its 13F portfolio. Knoll Capital Management is also relatively very bullish on the stock, earmarking 1.95 percent of its 13F equity portfolio to CTL.
Because CenturyLink, Inc. (NYSE:CTL) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few fund managers that slashed their full holdings last quarter. Interestingly, Israel Englander's Millennium Management said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, totaling close to $29.7 million in stock. Phill Gross and Robert Atchinson's fund, Adage Capital Management, also cut its stock, about $15 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as CenturyLink, Inc. (NYSE:CTL) but similarly valued. We will take a look at Brown & Brown, Inc. (NYSE:BRO), EPAM Systems Inc (NYSE:EPAM), Hess Corporation (NYSE:HES), and Discovery Inc. (NASDAQ:DISCA). This group of stocks' market values match CTL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BRO,26,585823,3 EPAM,27,338859,-1 HES,28,253381,-6 DISCA,32,233387,-6 Average,28.25,352863,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $353 million. That figure was $775 million in CTL's case. Discovery Inc. (NASDAQ:DISCA) is the most popular stock in this table. On the other hand Brown & Brown, Inc. (NYSE:BRO) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks CenturyLink, Inc. (NYSE:CTL) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately CTL wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CTL were disappointed as the stock returned 6.5% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.