Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is Crown Castle International Corp. (REIT) (NYSE:CCI) ready to rally soon? The best stock pickers are becoming more confident. The number of long hedge fund positions rose by 1 in recent months. Our calculations also showed that CCI isn't among the 30 most popular stocks among hedge funds. CCI was in 35 hedge funds' portfolios at the end of March. There were 34 hedge funds in our database with CCI positions at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a glance at the recent hedge fund action surrounding Crown Castle International Corp. (REIT) (NYSE:CCI).
How have hedgies been trading Crown Castle International Corp. (REIT) (NYSE:CCI)?
At Q1's end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in CCI a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the biggest position in Crown Castle International Corp. (REIT) (NYSE:CCI). Bill & Melinda Gates Foundation Trust has a $682.6 million position in the stock, comprising 3.3% of its 13F portfolio. The second most bullish fund manager is Jim Simons of Renaissance Technologies, with a $499.6 million position; 0.5% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism include Ken Griffin's Citadel Investment Group, and Israel Englander's Millennium Management.
As aggregate interest increased, key hedge funds have jumped into Crown Castle International Corp. (REIT) (NYSE:CCI) headfirst. D E Shaw, managed by D. E. Shaw, initiated the biggest position in Crown Castle International Corp. (REIT) (NYSE:CCI). D E Shaw had $3 million invested in the company at the end of the quarter. Jim O'Brien and Jonathan Dorfman's Napier Park Global Capital also initiated a $2.6 million position during the quarter. The following funds were also among the new CCI investors: Gavin Saitowitz and Cisco J. del Valle's Springbok Capital, Andrew Sandler's Sandler Capital Management, and John Overdeck and David Siegel's Two Sigma Advisors.
Let's check out hedge fund activity in other stocks similar to Crown Castle International Corp. (REIT) (NYSE:CCI). These stocks are General Motors Company (NYSE:GM), Prudential Public Limited Company (NYSE:PUK), S&P Global Inc. (NYSE:SPGI), and Raytheon Company (NYSE:RTN). This group of stocks' market valuations are similar to CCI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GM,53,5393147,-7 PUK,6,34465,-3 SPGI,54,3903557,0 RTN,40,1200692,2 Average,38.25,2632965,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $2633 million. That figure was $2191 million in CCI's case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 6 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on CCI, though not to the same extent, as the stock returned -0.2% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.