"Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value," are the words of Maran Capital's Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Crown Castle International Corp. (REIT) (NYSE:CCI) and see how it was affected.
Is Crown Castle International Corp. (REIT) (NYSE:CCI) a buy, sell, or hold? The best stock pickers are becoming more confident. The number of long hedge fund positions inched up by 5 in recent months. Our calculations also showed that CCI isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to check out the latest hedge fund action regarding Crown Castle International Corp. (REIT) (NYSE:CCI).
What have hedge funds been doing with Crown Castle International Corp. (REIT) (NYSE:CCI)?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards CCI over the last 13 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Crown Castle International Corp. (REIT) (NYSE:CCI) was held by Renaissance Technologies, which reported holding $601.8 million worth of stock at the end of September. It was followed by Bill & Melinda Gates Foundation Trust with a $593.7 million position. Other investors bullish on the company included D E Shaw, Echo Street Capital Management, and AQR Capital Management.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, established the largest call position in Crown Castle International Corp. (REIT) (NYSE:CCI). Point72 Asset Management had $50.1 million invested in the company at the end of the quarter. Howard Marks's Oaktree Capital Management also initiated a $34.8 million position during the quarter. The other funds with brand new CCI positions are Christopher Lord's Criterion Capital, Joe DiMenna's ZWEIG DIMENNA PARTNERS, and Richard Driehaus's Driehaus Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Crown Castle International Corp. (REIT) (NYSE:CCI) but similarly valued. These stocks are Dominion Energy, Inc. (NYSE:D), The Blackstone Group L.P. (NYSE:BX), Marriott International Inc (NYSE:MAR), and Capital One Financial Corp. (NYSE:COF). This group of stocks' market caps are closest to CCI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position D,27,475591,-1 BX,35,615157,1 MAR,29,1552733,-13 COF,47,2509533,7 Average,34.5,1288254,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $1.29 billion. That figure was $1.80 billion in CCI's case. Capital One Financial Corp. (NYSE:COF) is the most popular stock in this table. On the other hand Dominion Energy, Inc. (NYSE:D) is the least popular one with only 27 bullish hedge fund positions. Crown Castle International Corp. (REIT) (NYSE:CCI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard COF might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.