In this article you are going to find out whether hedge funds think Millicom International Cellular S.A. (NASDAQ:TIGO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Hedge fund interest in Millicom International Cellular S.A. (NASDAQ:TIGO) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare TIGO to other stocks including Clean Harbors Inc (NYSE:CLH), Stifel Financial Corp. (NYSE:SF), and Texas Roadhouse Inc (NASDAQ:TXRH) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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_338410" align="aligncenter" width="397"] Jeffrey Bronchick of Cove Street Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's check out the key hedge fund action surrounding Millicom International Cellular S.A. (NASDAQ:TIGO).
How have hedgies been trading Millicom International Cellular S.A. (NASDAQ:TIGO)?
At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in TIGO a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Millicom International Cellular S.A. (NASDAQ:TIGO) was held by GAMCO Investors, which reported holding $24.4 million worth of stock at the end of September. It was followed by Cove Street Capital with a $24 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Cove Street Capital allocated the biggest weight to Millicom International Cellular S.A. (NASDAQ:TIGO), around 4.92% of its 13F portfolio. Moon Capital is also relatively very bullish on the stock, setting aside 0.53 percent of its 13F equity portfolio to TIGO.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the first quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks similar to Millicom International Cellular S.A. (NASDAQ:TIGO). These stocks are Clean Harbors Inc (NYSE:CLH), Stifel Financial Corp. (NYSE:SF), Texas Roadhouse Inc (NASDAQ:TXRH), and Verint Systems Inc. (NASDAQ:VRNT). This group of stocks' market values are closest to TIGO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLH,25,244225,1 SF,17,106242,2 TXRH,27,146523,4 VRNT,17,205592,2 Average,21.5,175646,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $53 million in TIGO's case. Texas Roadhouse Inc (NASDAQ:TXRH) is the most popular stock in this table. On the other hand Stifel Financial Corp. (NYSE:SF) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Millicom International Cellular S.A. (NASDAQ:TIGO) is even less popular than SF. Hedge funds dodged a bullet by taking a bearish stance towards TIGO. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately TIGO wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); TIGO investors were disappointed as the stock returned 1.2% during the second quarter (through June 10th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.