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Hedge Funds Are Selling CyrusOne Inc (CONE)

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Debasis Saha
·7 min read
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The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought CyrusOne Inc (NASDAQ:CONE) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is CyrusOne Inc (NASDAQ:CONE) a healthy stock for your portfolio? Prominent investors were turning less bullish. The number of long hedge fund positions decreased by 6 in recent months. CyrusOne Inc (NASDAQ:CONE) was in 25 hedge funds' portfolios at the end of June. The all time high for this statistics is 35. Our calculations also showed that CONE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 31 hedge funds in our database with CONE positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MOORE GLOBAL INVESTMENTS
MOORE GLOBAL INVESTMENTS

Louis Bacon Moore of Moore Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let's take a glance at the recent hedge fund action regarding CyrusOne Inc (NASDAQ:CONE).

How have hedgies been trading CyrusOne Inc (NASDAQ:CONE)?

Heading into the third quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CONE over the last 20 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CONE A Good Stock To Buy?
Is CONE A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of CyrusOne Inc (NASDAQ:CONE), with a stake worth $235 million reported as of the end of September. Trailing Citadel Investment Group was Tremblant Capital, which amassed a stake valued at $70.9 million. Moore Global Investments, Fisher Asset Management, and Marlowe Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to CyrusOne Inc (NASDAQ:CONE), around 10.38% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, dishing out 2.99 percent of its 13F equity portfolio to CONE.

Since CyrusOne Inc (NASDAQ:CONE) has faced bearish sentiment from hedge fund managers, we can see that there was a specific group of funds who were dropping their full holdings by the end of the second quarter. At the top of the heap, Greg Poole's Echo Street Capital Management said goodbye to the largest position of the "upper crust" of funds followed by Insider Monkey, worth close to $13.8 million in stock, and Eduardo Abush's Waterfront Capital Partners was right behind this move, as the fund cut about $7.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 6 funds by the end of the second quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as CyrusOne Inc (NASDAQ:CONE) but similarly valued. We will take a look at Beyond Meat, Inc. (NASDAQ:BYND), Henry Schein, Inc. (NASDAQ:HSIC), Ciena Corporation (NASDAQ:CIEN), Chegg Inc (NYSE:CHGG), Mylan Inc. (NASDAQ:MYL), Gold Fields Limited (NYSE:GFI), and Caesars Entertainment Corp (NASDAQ:CZR). This group of stocks' market valuations resemble CONE's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BYND,29,253737,16 HSIC,33,1057007,-2 CIEN,32,369502,1 CHGG,45,1004897,11 MYL,46,1646058,-3 GFI,15,548446,-7 CZR,50,3911673,3 Average,35.7,1255903,2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $1256 million. That figure was $483 million in CONE's case. Caesars Entertainment Corp (NASDAQ:CZR) is the most popular stock in this table. On the other hand Gold Fields Limited (NYSE:GFI) is the least popular one with only 15 bullish hedge fund positions. CyrusOne Inc (NASDAQ:CONE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CONE is 34.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately CONE wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CONE investors were disappointed as the stock returned -1.1% since Q2 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 in 2020.

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

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