5 Cheap Penny Stocks to Buy According to Hedge Funds

3. Altice USA, Inc. (NYSE:ATUS)

Number of Hedge Fund Holders: 27

P/E Ratio as of March 29: 7.26

Altice USA, Inc. (NYSE:ATUS) offers broadband communications and video services in the United States, Canada, Puerto Rico, and the Virgin Islands. It provides broadband, video, telephony, and mobile services to residential and business customers. According to Cowen analyst Gregory William, Altice USA, Inc. (NYSE:ATUS)’s financial results for the fourth quarter of 2022 were lower than expected, and the company is still spending heavily on operating expenses to revive the business in anticipation of growth in broadband subscribers. As a result, William reduced the firm’s price target on Altice USA, Inc. (NYSE:ATUS) from $21 to $18, but maintained an Outperform rating on the shares on February 23. 

According to Insider Monkey’s fourth quarter database, 27 hedge funds were bullish on Altice USA, Inc. (NYSE:ATUS), and Jonathan Kolatch’s Redwood Capital Management is the largest stakeholder of the company, with 15.2 million shares worth $70.3 million. 

Here is what MPE Capital has to say about Altice USA, Inc. (NYSE:ATUS) in its Q2 2022 investor letter:

“Two (very) costly mistakes I’ve made over the last twelve months have been my investments in Altice USA and Poshmark. Both are down over 50% from my initial purchase price. I not only poorly appraised business quality, I also incorrectly appraised the intrinsic value of both of these companies. It should rarely end up in the case that we pay over intrinsic value, at worst case we should never lose money on an investment. I will dive into one of these mistakes below and maybe dive into the other in a future letter. My thinking when buying Altice USA was that they operate as a duopoly in their main footprint, the New York Tri-State area. They provide a needs-based service: internet, video, and voice services. I figured this is a very stable business with high barriers to entry. Management seemed competent as well based on historical capital allocation decisions. I didn’t fully appreciate at the time how poorly positioned they were relative to Verizon Fios, as well as how fiercely competitive the business can get on promotions and customer acquisition.

Altice offers hybrid fiber coaxial (HFC) while Fios offers fiber-to-the-home (FTTH). FTTH is a far superior product, which has led to some share loss to Fios in the parts of their footprint that overlap. There have also been some subscriber losses in their other footprint due to new cable entrants and fixed wireless offerings. (Click to read full text)