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Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren't very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds' top 20 stock picks easily bested the broader market, at 24.4% compared to 20.4%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn't perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
ATN International, Inc. (NASDAQ:ATNI) investors should pay attention to a decrease in hedge fund sentiment lately. Our calculations also showed that ATNI 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.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 go over the fresh hedge fund action regarding ATN International, Inc. (NASDAQ:ATNI).
How have hedgies been trading ATN International, Inc. (NASDAQ:ATNI)?
At Q2's end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ATNI over the last 16 quarters. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of ATN International, Inc. (NASDAQ:ATNI), with a stake worth $39.5 million reported as of the end of March. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $9.3 million. Third Avenue Management, AQR Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that ATN International, Inc. (NASDAQ:ATNI) has experienced declining sentiment from the smart money, we can see that there was a specific group of funds that slashed their entire stakes by the end of the second quarter. Intriguingly, Ken Griffin's Citadel Investment Group sold off the biggest position of all the hedgies monitored by Insider Monkey, worth close to $0.3 million in call options, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund dumped about $0.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the second quarter.
Let's also examine hedge fund activity in other stocks similar to ATN International, Inc. (NASDAQ:ATNI). We will take a look at Contura Energy, Inc. (NYSE:CTRA), DMC Global Inc. (NASDAQ:BOOM), National Western Life Group, Inc. (NASDAQ:NWLI), and The Greenbrier Companies, Inc. (NYSE:GBX). This group of stocks' market valuations are similar to ATNI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTRA,22,376990,-10 BOOM,20,103621,6 NWLI,8,17676,-1 GBX,14,19968,3 Average,16,129564,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $62 million in ATNI's case. Contura Energy, Inc. (NYSE:CTRA) is the most popular stock in this table. On the other hand National Western Life Group, Inc. (NASDAQ:NWLI) is the least popular one with only 8 bullish hedge fund positions. ATN International, Inc. (NASDAQ:ATNI) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 ATNI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ATNI investors were disappointed as the stock returned 1.4% 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 so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
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