Hedge Funds Cashing Out Of Altice USA, Inc. (ATUS)

In this article we will check out the progression of hedge fund sentiment towards Altice USA, Inc. (NYSE:ATUS) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Altice USA, Inc. (NYSE:ATUS) investors should be aware of a decrease in hedge fund sentiment of late. ATUS was in 47 hedge funds’ portfolios at the end of the first quarter of 2020. There were 54 hedge funds in our database with ATUS holdings at the end of the previous quarter. Our calculations also showed that ATUS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Steven Tananbaum of GoldenTree Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the key hedge fund action regarding Altice USA, Inc. (NYSE:ATUS).

How are hedge funds trading Altice USA, Inc. (NYSE:ATUS)?

At Q1’s end, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ATUS over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

More specifically, Soroban Capital Partners was the largest shareholder of Altice USA, Inc. (NYSE:ATUS), with a stake worth $579.5 million reported as of the end of September. Trailing Soroban Capital Partners was Zimmer Partners, which amassed a stake valued at $219.3 million. Palestra Capital Management, Pelham Capital, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to Altice USA, Inc. (NYSE:ATUS), around 27.71% of its 13F portfolio. Simcoe Capital Management is also relatively very bullish on the stock, dishing out 22.95 percent of its 13F equity portfolio to ATUS.

Due to the fact that Altice USA, Inc. (NYSE:ATUS) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few funds that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Gabriel Plotkin’s Melvin Capital Management dumped the largest stake of all the hedgies watched by Insider Monkey, comprising an estimated $260.4 million in stock, and John Petry’s Sessa Capital was right behind this move, as the fund cut about $46.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Altice USA, Inc. (NYSE:ATUS) but similarly valued. We will take a look at Cardinal Health, Inc. (NYSE:CAH), Campbell Soup Company (NYSE:CPB), Trip.com Group Limited (NASDAQ:TCOM), and Grifols SA (NASDAQ:GRFS). This group of stocks’ market valuations resemble ATUS’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $710 million. That figure was $2396 million in ATUS’s case. Cardinal Health, Inc. (NYSE:CAH) is the most popular stock in this table. On the other hand Grifols SA (NASDAQ:GRFS) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Altice USA, Inc. (NYSE:ATUS) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately ATUS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ATUS were disappointed as the stock returned 8.4% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.