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Is Frontier Communications Corporation (FTR) Going to Burn These Hedge Funds?

Debasis Saha

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Frontier Communications Corporation (NASDAQ:FTR) based on those filings.

Frontier Communications Corporation (NASDAQ:FTR) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds' portfolios at the end of September. 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 Trevena Inc (NASDAQ:TRVN), Verastem Inc (NASDAQ:VSTM), and Emclaire Financial Corp (NASDAQ:EMCF) to gather more data points. Our calculations also showed that FTR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the financial world there are several gauges stock market investors use to appraise publicly traded companies. A couple of the less utilized gauges are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can outperform the S&P 500 by a very impressive margin (see the details here).

[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]

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We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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. We also rely on the best performing hedge funds' buy/sell signals. We're going to go over the new hedge fund action encompassing Frontier Communications Corporation (NASDAQ:FTR).

How are hedge funds trading Frontier Communications Corporation (NASDAQ:FTR)?

At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in FTR a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Is FTR A Good Stock To Buy?

The largest stake in Frontier Communications Corporation (NASDAQ:FTR) was held by Renaissance Technologies, which reported holding $4.1 million worth of stock at the end of September. It was followed by Antara Capital with a $0.8 million position. Other investors bullish on the company included Coatue Management, D E Shaw, and Paloma Partners. In terms of the portfolio weights assigned to each position Antara Capital allocated the biggest weight to Frontier Communications Corporation (NASDAQ:FTR), around 0.36% of its 13F portfolio. Ellington is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to FTR.

Seeing as Frontier Communications Corporation (NASDAQ:FTR) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of hedgies who were dropping their entire stakes in the third quarter. Intriguingly, Michael Hintze's CQS Cayman LP said goodbye to the largest investment of the "upper crust" of funds followed by Insider Monkey, worth about $2.6 million in call options, and Bill Miller's Miller Value Partners was right behind this move, as the fund dropped about $2.5 million worth. These transactions are intriguing to say the least, as aggregate 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 Frontier Communications Corporation (NASDAQ:FTR) but similarly valued. We will take a look at Trevena Inc (NASDAQ:TRVN), Verastem Inc (NASDAQ:VSTM), Emclaire Financial Corp (NASDAQ:EMCF), and RTW Retailwinds, Inc. (NASDAQ:RTW). This group of stocks' market values are closest to FTR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRVN,6,2792,1 VSTM,8,8446,-1 EMCF,2,775,0 RTW,7,4105,1 Average,5.75,4030,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $6 million in FTR's case. Verastem Inc (NASDAQ:VSTM) is the most popular stock in this table. On the other hand Emclaire Financial Corp (NASDAQ:EMCF) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Frontier Communications Corporation (NASDAQ:FTR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FTR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FTR were disappointed as the stock returned -23% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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

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