Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Is Altice USA, Inc. (NYSE:ATUS) a buy, sell, or hold? Prominent investors are turning bullish. The number of bullish hedge fund bets inched up by 1 lately. Our calculations also showed that ATUS 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 40 percentage points since May 2014 through May 30, 2019 (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.
Let's take a peek at the key hedge fund action surrounding Altice USA, Inc. (NYSE:ATUS).
Hedge fund activity in Altice USA, Inc. (NYSE:ATUS)
At Q1's end, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in ATUS a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Soroban Capital Partners, managed by Eric W. Mandelblatt and Gaurav Kapadia, holds the biggest position in Altice USA, Inc. (NYSE:ATUS). Soroban Capital Partners has a $429.6 million position in the stock, comprising 7.8% of its 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $402.3 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism contain Jim Simons's Renaissance Technologies, Ross Turner's Pelham Capital and Stuart J. Zimmer's Zimmer Partners.
Consequently, specific money managers were breaking ground themselves. Soroban Capital Partners, managed by Eric W. Mandelblatt and Gaurav Kapadia, initiated the largest position in Altice USA, Inc. (NYSE:ATUS). Soroban Capital Partners had $429.6 million invested in the company at the end of the quarter. Andrew Immerman and Jeremy Schiffman's Palestra Capital Management also made a $127.1 million investment in the stock during the quarter. The following funds were also among the new ATUS investors: Robert Pohly's Samlyn Capital, George Soros's Soros Fund Management, and Bruce Kovner's Caxton Associates LP.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Altice USA, Inc. (NYSE:ATUS) but similarly valued. These stocks are Symantec Corporation (NASDAQ:SYMC), Evergy, Inc. (NYSE:EVRG), KB Financial Group, Inc. (NYSE:KB), and The Cooper Companies, Inc. (NYSE:COO). This group of stocks' market caps match ATUS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SYMC,29,1762346,-4 EVRG,24,925650,-1 KB,12,54461,6 COO,28,1007002,7 Average,23.25,937365,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $937 million. That figure was $2522 million in ATUS's case. Symantec Corporation (NASDAQ:SYMC) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Altice USA, Inc. (NYSE:ATUS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on ATUS as the stock returned 11.9% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.