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How Did Charter Communications, Inc. (CHTR) Compare Against Top Hedge Fund Stocks in 2019?

Abigail Fisher

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Charter Communications, Inc. (NASDAQ:CHTR).

Charter Communications, Inc. (NASDAQ:CHTR) has experienced a decrease in hedge fund sentiment recently. Our calculations also showed that CHTR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_221400" align="aligncenter" width="450"] Crispin Odey of Odey Asset Management Group[/caption]

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we're going to take a glance at the recent hedge fund action surrounding Charter Communications, Inc. (NASDAQ:CHTR).

How are hedge funds trading Charter Communications, Inc. (NASDAQ:CHTR)?

Heading into the fourth quarter of 2019, a total of 63 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the second quarter of 2019. By comparison, 67 hedge funds held shares or bullish call options in CHTR 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Warren Buffett's Berkshire Hathaway has the number one position in Charter Communications, Inc. (NASDAQ:CHTR), worth close to $2.2364 billion, amounting to 1% of its total 13F portfolio. On Berkshire Hathaway's heels is John Armitage of Egerton Capital Limited, with a $1.1044 billion position; the fund has 7.9% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Mark Massey's AltaRock Partners, Ken Griffin's Citadel Investment Group and Robert Rodriguez and Steven Romick's 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 13F portfolio. Hengistbury Investment Partners is also relatively very bullish on the stock, designating 36.97 percent of its 13F equity portfolio to CHTR.

Due to the fact that Charter Communications, Inc. (NASDAQ:CHTR) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few funds who sold off their full holdings in the third quarter. Interestingly, Oscar Hattink's BlueDrive Global Investors said goodbye to the largest position of the 750 funds monitored by Insider Monkey, worth an estimated $21.9 million in stock. Zachary Miller's fund, Parian Global Management, also cut its stock, about $10.2 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds in the third quarter.

Let's now review 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). All of these stocks' market caps are closest to CHTR's market cap.

[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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on CHTR as the stock returned 68.7% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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