Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged during the first quarter. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 40% and 25% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the first 5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
WideOpenWest, Inc. (NYSE:WOW) shareholders have witnessed a decrease in enthusiasm from smart money of late. WOW was in 11 hedge funds' portfolios at the end of March. There were 13 hedge funds in our database with WOW holdings at the end of the previous quarter. Our calculations also showed that wow isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to check out the fresh hedge fund action regarding WideOpenWest, Inc. (NYSE:WOW).
Hedge fund activity in WideOpenWest, Inc. (NYSE:WOW)
At Q1's end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WOW over the last 15 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in WideOpenWest, Inc. (NYSE:WOW) was held by Arrowstreet Capital, which reported holding $5.8 million worth of stock at the end of March. It was followed by Indaba Capital Management with a $5 million position. Other investors bullish on the company included GAMCO Investors, D E Shaw, and Citadel Investment Group.
Seeing as WideOpenWest, Inc. (NYSE:WOW) has witnessed a decline in interest from the smart money, it's easy to see that there is a sect of money managers who were dropping their positions entirely heading into Q3. Interestingly, Eric Edidin and Josh Lobel's Archer Capital Management dumped the biggest stake of the 700 funds monitored by Insider Monkey, worth about $4.5 million in stock. Jim Simons's fund, Renaissance Technologies, also cut its stock, about $1.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as WideOpenWest, Inc. (NYSE:WOW) but similarly valued. These stocks are Lakeland Bancorp, Inc. (NASDAQ:LBAI), TrustCo Bank Corp NY (NASDAQ:TRST), Ameresco Inc (NYSE:AMRC), and Oritani Financial Corp. (NASDAQ:ORIT). This group of stocks' market valuations resemble WOW's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LBAI,12,58117,0 TRST,10,46536,1 AMRC,10,30678,3 ORIT,7,36842,-1 Average,9.75,43043,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $22 million in WOW's case. Lakeland Bancorp, Inc. (NASDAQ:LBAI) is the most popular stock in this table. On the other hand Oritani Financial Corp. (NASDAQ:ORIT) is the least popular one with only 7 bullish hedge fund positions. WideOpenWest, Inc. (NYSE:WOW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately WOW wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WOW were disappointed as the stock returned -18% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.