Do Hedge Funds Love Frontier Communications Corp (FTR)?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Frontier Communications Corp (NASDAQ:FTR).

Is Frontier Communications Corp undervalued? The best stock pickers are in a bearish mood. The number of long hedge fund positions fell by 8 in recent months. FTR was in 33 hedge funds’ portfolios at the end of September. There were 41 hedge funds in our database with FTR positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CBOE Holdings, Inc (NASDAQ:CBOE), East West Bancorp, Inc. (NASDAQ:EWBC), and Realogy Holdings Corp (NYSE:RLGY) to gather more data points.

Now, let’s take a look at the new action surrounding Frontier Communications Corp (NASDAQ:FTR).

Hedge fund activity in Frontier Communications Corp (NASDAQ:FTR)

At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Seth Klarman’s Baupost Group has the largest position in Frontier Communications Corp (NASDAQ:FTR), worth close to $64.1 million, comprising 1.1% of its total 13F portfolio. On Baupost Group’s heels is Millennium Management, led by Israel Englander, holding a $54.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Steve Cohen’s Point72 Asset Management, Nick Niell’s Arrowgrass Capital Partners and Ken Griffin’s Citadel Investment Group.

Seeing as Frontier Communications Corp (NASDAQ:FTR) has experienced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies who were dropping their positions entirely last quarter. Intriguingly, Paul Orlin and Alex Porter’s Amici Capital cut the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $17.9 million in stock. John M. Angelo and Michael L. Gordon’s fund, Angelo Gordon & Co, also sold off its stock, about $17.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 8 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Frontier Communications Corp (NASDAQ:FTR) but similarly valued. These stocks are CBOE Holdings, Inc (NASDAQ:CBOE), East West Bancorp, Inc. (NASDAQ:EWBC), Realogy Holdings Corp (NYSE:RLGY), and Allegion PLC (NYSE:ALLE). This group of stocks’ market caps are closest to FTR’s market cap.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $990 million. That figure was $451 million in FTR’s case. Realogy Holdings Corp (NYSE:RLGY) is the most popular stock in this table. On the other hand CBOE Holdings, Inc (NASDAQ:CBOE) is the least popular one with only 19 bullish hedge fund positions. Frontier Communications Corp (NASDAQ:FTR) 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. In this regard RLGY might be a better candidate to consider a long position.