While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Charter Communications, Inc. (NASDAQ:CHTR).
Charter Communications, Inc. (NASDAQ:CHTR) was in 63 hedge funds' portfolios at the end of September. CHTR has seen a decrease in activity from the world's largest hedge funds lately. There were 66 hedge funds in our database with CHTR positions at the end of the previous quarter. Our calculations also showed that CHTR isn't among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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_670753" align="aligncenter" width="1613"] John Armitage of Egerton Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to review the latest hedge fund action surrounding Charter Communications, Inc. (NASDAQ:CHTR).
How are hedge funds trading Charter Communications, Inc. (NASDAQ:CHTR)?
At Q3's end, a total of 63 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 67 hedge funds with a bullish position in CHTR a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Charter Communications, Inc. (NASDAQ:CHTR) was held by Berkshire Hathaway, which reported holding $2236.4 million worth of stock at the end of September. It was followed by Egerton Capital Limited with a $1104.4 million position. Other investors bullish on the company included AltaRock Partners, Citadel Investment Group, and First Pacific Advisors. In terms of the portfolio weights assigned to each position AltaRock Partners allocated the biggest weight to Charter Communications, Inc. (NASDAQ:CHTR), around 38.63% of its portfolio. Hengistbury Investment Partners is also relatively very bullish on the stock, setting aside 36.97 percent of its 13F equity portfolio to CHTR.
Seeing as Charter Communications, Inc. (NASDAQ:CHTR) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few funds that decided to sell off their full holdings last quarter. Interestingly, Oscar Hattink's BlueDrive Global Investors dumped the biggest stake of the 750 funds tracked by Insider Monkey, comprising about $21.9 million in stock. Zachary Miller's fund, Parian Global Management, also dropped its stock, about $10.2 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Charter Communications, Inc. (NASDAQ:CHTR) but similarly valued. We will take a look at Rio Tinto Group (NYSE:RIO), U.S. Bancorp (NYSE:USB), Lowe's Companies, Inc. (NYSE:LOW), and British American Tobacco plc (NYSE:BTI). This group of stocks' market valuations are closest to CHTR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RIO,21,1491441,-3 USB,42,8308441,3 LOW,69,5706061,6 BTI,8,374309,-1 Average,35,3970063,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $3970 million. That figure was $8307 million in CHTR's case. Lowe's Companies, Inc. (NYSE:LOW) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSE:BTI) is the least popular one with only 8 bullish hedge fund positions. Charter Communications, Inc. (NASDAQ:CHTR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on CHTR as the stock returned 13.7% during the fourth quarter (through 11/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.