Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first half of 2019. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Crown Castle International Corp. (REIT) (NYSE:CCI) to find out whether it was one of their high conviction long-term ideas.
Crown Castle International Corp. (REIT) (NYSE:CCI) has seen a decrease in enthusiasm from smart money in recent months. Our calculations also showed that CCI isn't among the 30 most popular stocks among hedge funds.
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 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.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. Let's review the key hedge fund action surrounding Crown Castle International Corp. (REIT) (NYSE:CCI).
What does smart money think about Crown Castle International Corp. (REIT) (NYSE:CCI)?
At the end of the second quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CCI over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in Crown Castle International Corp. (REIT) (NYSE:CCI), which was worth $695.1 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $377 million worth of shares. Moreover, Citadel Investment Group, Echo Street Capital Management, and AQR Capital Management were also bullish on Crown Castle International Corp. (REIT) (NYSE:CCI), allocating a large percentage of their portfolios to this stock.
Due to the fact that Crown Castle International Corp. (REIT) (NYSE:CCI) has faced a decline in interest from hedge fund managers, it's safe to say that there is a sect of hedgies who sold off their full holdings last quarter. Intriguingly, Steve Cohen's Point72 Asset Management said goodbye to the biggest position of the "upper crust" of funds followed by Insider Monkey, comprising about $140.8 million in stock. Michael Platt and William Reeves's fund, BlueCrest Capital Mgmt., also cut its stock, about $6.1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Crown Castle International Corp. (REIT) (NYSE:CCI) but similarly valued. We will take a look at Takeda Pharmaceutical Company Limited (NYSE:TAK), Northrop Grumman Corporation (NYSE:NOC), Zoetis Inc (NYSE:ZTS), and Illumina, Inc. (NASDAQ:ILMN). This group of stocks' market valuations are closest to CCI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TAK,27,1289782,-8 NOC,37,600316,2 ZTS,40,2060753,3 ILMN,43,1354306,1 Average,36.75,1326289,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $1326 million. That figure was $1910 million in CCI's case. Illumina, Inc. (NASDAQ:ILMN) is the most popular stock in this table. On the other hand Takeda Pharmaceutical Company Limited (NYSE:TAK) 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. 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. A small number of hedge funds were also right about betting on CCI as the stock returned 7.5% during the same time frame and outperformed the market by an even larger margin. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.