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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Consolidated Communications Holdings Inc (NASDAQ:CNSL) changed recently.
Is CNSL a good stock to buy now? Consolidated Communications Holdings Inc (NASDAQ:CNSL) shareholders have witnessed an increase in hedge fund interest lately. Consolidated Communications Holdings Inc (NASDAQ:CNSL) was in 15 hedge funds' portfolios at the end of September. The all time high for this statistic is 21. Our calculations also showed that CNSL isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's analyze the latest hedge fund action encompassing Consolidated Communications Holdings Inc (NASDAQ:CNSL).
Do Hedge Funds Think CNSL Is A Good Stock To Buy Now?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the second quarter of 2020. By comparison, 21 hedge funds held shares or bullish call options in CNSL a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in Consolidated Communications Holdings Inc (NASDAQ:CNSL) was held by Renaissance Technologies, which reported holding $10.2 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $4.7 million position. Other investors bullish on the company included Driehaus Capital, AQR Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Driehaus Capital allocated the biggest weight to Consolidated Communications Holdings Inc (NASDAQ:CNSL), around 0.08% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to CNSL.
Consequently, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, established the largest position in Consolidated Communications Holdings Inc (NASDAQ:CNSL). Millennium Management had $0.2 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also made a $0.1 million investment in the stock during the quarter. The other funds with brand new CNSL positions are Paul Tudor Jones's Tudor Investment Corp and Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Consolidated Communications Holdings Inc (NASDAQ:CNSL) but similarly valued. We will take a look at ChannelAdvisor Corp (NYSE:ECOM), SP Plus Corp (NASDAQ:SP), Enerplus Corp (NYSE:ERF), The Children's Place Inc. (NASDAQ:PLCE), Tekla Life Sciences Investors (NYSE:HQL), WAVE Life Sciences Ltd. (NASDAQ:WVE), and Arlo Technologies, Inc. (NYSE:ARLO). All of these stocks' market caps resemble CNSL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ECOM,19,62827,0 SP,13,23906,-2 ERF,17,77008,1 PLCE,16,84447,-7 HQL,2,1362,0 WVE,24,163279,7 ARLO,16,43387,1 Average,15.3,65174,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $24 million in CNSL's case. WAVE Life Sciences Ltd. (NASDAQ:WVE) is the most popular stock in this table. On the other hand Tekla Life Sciences Investors (NYSE:HQL) is the least popular one with only 2 bullish hedge fund positions. Consolidated Communications Holdings Inc (NASDAQ:CNSL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CNSL is 59. Stocks with 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'd rather spend our time researching stocks that hedge funds are piling on. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately CNSL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CNSL investors were disappointed as the stock returned -11.8% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.