Do Hedge Funds Love Level 3 Communications, Inc. (LVLT)?

Insider Monkey finished processing more than 700 13F filings made by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30. In this article we are going to take a look at smart money sentiment towards Level 3 Communications, Inc. (NYSE:LVLT).

Is Level 3 Communications, Inc. (NYSE:LVLT) the right pick for your portfolio? The best stock pickers are turning less bullish. The number of bullish hedge fund bets shrunk by 7 in recent months. 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 Telefonica Brasil SA (ADR) (NYSE:VIV), AEGON N.V. (ADR) (NYSE:AEG), and Fifth Third Bancorp (NASDAQ:FITB) to gather more data points.

In the eyes of most market participants, hedge funds are perceived as unimportant, old financial vehicles of yesteryear. While there are over an 8000 funds in operation today, Our researchers choose to focus on the top tier of this group, approximately 700 funds. These money managers manage the majority of the smart money’s total capital, and by keeping an eye on their best equity investments, Insider Monkey has deciphered various investment strategies that have historically outrun the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, let’s take a look at the fresh action surrounding Level 3 Communications, Inc. (NYSE:LVLT).

How are hedge funds trading Level 3 Communications, Inc. (NYSE:LVLT)?

At the end of the third quarter, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the second quarter. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Southeastern Asset Management, managed by Mason Hawkins, holds the number one position in Level 3 Communications, Inc. (NYSE:LVLT). Southeastern Asset Management has a $1.7692 billion position in the stock, comprising 14.9% of its 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $220.6 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Robert Pitts’s Steadfast Capital Management, Ken Griffin’s Citadel Investment Group and James Crichton’s Hitchwood Capital Management.

Seeing as Level 3 Communications, Inc. (NYSE:LVLT) has experienced falling interest from hedge fund managers, we can see that there exists a select few money managers that slashed their full holdings in the third quarter. Interestingly, Josh Resnick’s Jericho Capital Asset Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $76.8 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $42.8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 7 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to Level 3 Communications, Inc. (NYSE:LVLT). We will take a look at Telefonica Brasil SA (ADR) (NYSE:VIV), AEGON N.V. (ADR) (NYSE:AEG), Fifth Third Bancorp (NASDAQ:FITB), and Edwards Lifesciences Corp (NYSE:EW). This group of stocks’ market valuations are similar to LVLT’s market valuation.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $670 million. That figure was $3181 million in LVLT’s case. Edwards Lifesciences Corp (NYSE:EW) is the most popular stock in this table. On the other hand AEGON N.V. (ADR) (NYSE:AEG) is the least popular one with only 6 bullish hedge fund positions. Level 3 Communications, Inc. (NYSE:LVLT) 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 EW might be a better candidate to consider a long position.