Is Telephone & Data Systems, Inc. (NYSE:TDS) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Telephone & Data Systems, Inc. (NYSE:TDS) a superb stock to buy now? Prominent investors are buying. The number of long hedge fund bets inched up by 1 lately. Our calculations also showed that tds isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to take a gander at the key hedge fund action regarding Telephone & Data Systems, Inc. (NYSE:TDS).
Hedge fund activity in Telephone & Data Systems, Inc. (NYSE:TDS)
At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in TDS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Telephone & Data Systems, Inc. (NYSE:TDS), with a stake worth $115.2 million reported as of the end of March. Trailing Renaissance Technologies was GAMCO Investors, which amassed a stake valued at $75.6 million. GLG Partners, AQR Capital Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, some big names have jumped into Telephone & Data Systems, Inc. (NYSE:TDS) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Telephone & Data Systems, Inc. (NYSE:TDS). Arrowstreet Capital had $22.2 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $5.9 million investment in the stock during the quarter. The only other fund with a brand new TDS position is Mike Vranos's Ellington.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Telephone & Data Systems, Inc. (NYSE:TDS) but similarly valued. These stocks are Stag Industrial Inc (NYSE:STAG), Valvoline Inc. (NYSE:VVV), Embraer SA (NYSE:ERJ), and Colfax Corporation (NYSE:CFX). This group of stocks' market values resemble TDS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STAG,15,186424,3 VVV,19,306405,1 ERJ,8,83463,-2 CFX,32,667763,5 Average,18.5,311014,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $438 million in TDS's case. Colfax Corporation (NYSE:CFX) is the most popular stock in this table. On the other hand Embraer SA (NYSE:ERJ) is the least popular one with only 8 bullish hedge fund positions. Telephone & Data Systems, Inc. (NYSE:TDS) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately TDS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TDS were disappointed as the stock returned -1.7% 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.