The market has been volatile as the Federal Reserve continues its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points through November 16th. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Charter Communications, Inc. (NASDAQ:CHTR) and find out how it is affected by hedge funds’ moves.
Charter Communications, Inc. (NASDAQ:CHTR) investors should be aware of an increase in enthusiasm from smart money of late. Our calculations also showed that CHTR 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 the 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the recent hedge fund action regarding Charter Communications, Inc. (NASDAQ:CHTR).
How are hedge funds trading Charter Communications, Inc. (NASDAQ:CHTR)?
Heading into the fourth quarter of 2018, a total of 67 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with a bullish position in CHTR over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the most valuable position in Charter Communications, Inc. (NASDAQ:CHTR). Berkshire Hathaway has a $2.3923 billion position in the stock, comprising 1.1% of its 13F portfolio. On Berkshire Hathaway’s heels is Egerton Capital Limited, led by John Armitage, holding a $890.2 million position; 6.6% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions consist of John H. Scully’s SPO Advisory Corp, Farallon Capital and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Charter Communications, Inc. (NASDAQ:CHTR) headfirst. Egerton Capital Limited, managed by John Armitage, initiated the biggest position in Charter Communications, Inc. (NASDAQ:CHTR). Egerton Capital Limited had $890.2 million invested in the company at the end of the quarter. Doug Silverman and Alexander Klabin’s Senator Investment Group also initiated a $236.3 million position during the quarter. The following funds were also among the new CHTR investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, David Fiszel’s Honeycomb Asset Management, and Jacob Doft’s Highline Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Charter Communications, Inc. (NASDAQ:CHTR). We will take a look at EOG Resources Inc (NYSE:EOG), The Bank of Nova Scotia (NYSE:BNS), Walgreens Boots Alliance Inc (NASDAQ:WBA), and Ambev SA (NYSE:ABEV). This group of stocks’ market valuations are similar to CHTR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EOG | 37 | 952482 | 7 |
| BNS | 11 | 875002 | -3 |
| WBA | 34 | 1325362 | -5 |
| ABEV | 14 | 250062 | -4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $851 million. That figure was $8621 million in CHTR’s case. EOG Resources Inc (NYSE:EOG) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Charter Communications, Inc. (NASDAQ:CHTR) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
