Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Comtech Telecommunications Corp. (NASDAQ:CMTL).
Comtech Telecommunications Corp. (NASDAQ:CMTL) was in 17 hedge funds' portfolios at the end of June. CMTL investors should be aware of a decrease in activity from the world's largest hedge funds of late. There were 20 hedge funds in our database with CMTL holdings at the end of the previous quarter. Our calculations also showed that CMTL 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.
In the financial world there are a multitude of tools stock market investors put to use to value stocks. A duo of the most under-the-radar tools are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can outperform the market by a very impressive amount (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 take a gander at the new hedge fund action encompassing Comtech Telecommunications Corp. (NASDAQ:CMTL).
What does smart money think about Comtech Telecommunications Corp. (NASDAQ:CMTL)?
At Q2's end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CMTL over the last 16 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Huber Capital Management, managed by Joe Huber, holds the most valuable position in Comtech Telecommunications Corp. (NASDAQ:CMTL). Huber Capital Management has a $39.3 million position in the stock, comprising 4.7% of its 13F portfolio. The second most bullish fund manager is Royce & Associates, led by Chuck Royce, holding a $19.6 million position; 0.2% of its 13F portfolio is allocated to the company. Some other peers with similar optimism include Spencer M. Waxman's Shannon River Fund Management, Renaissance Technologies and Paul Marshall and Ian Wace's Marshall Wace LLP.
Because Comtech Telecommunications Corp. (NASDAQ:CMTL) has witnessed falling interest from the entirety of the hedge funds we track, it's easy to see that there is a sect of fund managers who sold off their entire stakes last quarter. At the top of the heap, Matthew Hulsizer's PEAK6 Capital Management dumped the largest stake of all the hedgies monitored by Insider Monkey, totaling about $2.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also dumped its stock, about $0.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Comtech Telecommunications Corp. (NASDAQ:CMTL). These stocks are Extraction Oil & Gas, Inc. (NASDAQ:XOG), Keane Group, Inc. (NYSE:FRAC), Genesco Inc. (NYSE:GCO), and Global Partners LP (NYSE:GLP). This group of stocks' market caps resemble CMTL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XOG,17,91772,-3 FRAC,21,341424,-7 GCO,17,55539,-2 GLP,3,1644,-2 Average,14.5,122595,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $107 million in CMTL's case. Keane Group, Inc. (NYSE:FRAC) is the most popular stock in this table. On the other hand Global Partners LP (NYSE:GLP) is the least popular one with only 3 bullish hedge fund positions. Comtech Telecommunications Corp. (NASDAQ:CMTL) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on CMTL as the stock returned 16% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.