Is Telephone and Data Systems, Inc. (NYSE:TDS) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Telephone and Data Systems, Inc. (NYSE:TDS) has experienced an increase in enthusiasm from smart money lately. TDS was in 25 hedge funds' portfolios at the end of June. There were 23 hedge funds in our database with TDS positions at the end of the previous quarter. Our calculations also showed that TDS isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are a lot of formulas market participants employ to value their holdings. A couple of the less known formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform the market by a very impressive margin (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the fresh hedge fund action surrounding Telephone and Data Systems, Inc. (NYSE:TDS).
What have hedge funds been doing with Telephone and Data Systems, Inc. (NYSE:TDS)?
At Q2's end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TDS over the last 16 quarters. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Telephone and Data Systems, Inc. (NYSE:TDS) was held by Renaissance Technologies, which reported holding $115.7 million worth of stock at the end of March. It was followed by GAMCO Investors with a $72.3 million position. Other investors bullish on the company included AQR Capital Management, GLG Partners, and Arrowstreet Capital.
As aggregate interest increased, key hedge funds were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in Telephone and Data Systems, Inc. (NYSE:TDS). Point72 Asset Management had $0.6 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new TDS investors: Paul Marshall and Ian Wace's Marshall Wace LLP, Dmitry Balyasny's Balyasny Asset Management, and Karim Abbadi and Edward McBride's Centiva Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Telephone and Data Systems, Inc. (NYSE:TDS) but similarly valued. We will take a look at PagerDuty, Inc. (NYSE:PD), Apple Hospitality REIT Inc (NYSE:APLE), Chimera Investment Corporation (NYSE:CIM), and Mercury General Corporation (NYSE:MCY). This group of stocks' market caps match TDS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PD,22,68266,22 APLE,14,89183,1 CIM,13,116208,3 MCY,16,191028,1 Average,16.25,116171,6.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $393 million in TDS's case. PagerDuty, Inc. (NYSE:PD) is the most popular stock in this table. On the other hand Chimera Investment Corporation (NYSE:CIM) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Telephone and Data Systems, Inc. (NYSE:TDS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TDS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TDS were disappointed as the stock returned -14.6% during the third 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.