How do we determine whether Telephone & Data Systems, Inc. (NYSE:TDS) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Telephone & Data Systems, Inc. (NYSE:TDS) a good stock to buy now? Prominent investors are getting more optimistic. The number of bullish hedge fund bets improved by 1 lately. Our calculations also showed that TDS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). TDS was in 26 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with TDS positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are several formulas market participants put to use to assess stocks. Some of the most under-the-radar formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top money managers can outperform the broader indices by a healthy margin (see the details here).
Mario Gabelli of GAMCO Investors
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the fresh hedge fund action surrounding Telephone & Data Systems, Inc. (NYSE:TDS).
How have hedgies been trading Telephone & Data Systems, Inc. (NYSE:TDS)?
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TDS over the last 17 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Telephone & Data Systems, Inc. (NYSE:TDS), with a stake worth $93.1 million reported as of the end of September. Trailing Renaissance Technologies was GAMCO Investors, which amassed a stake valued at $54.9 million. Citadel Investment Group, AQR Capital Management, and NWI Management 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 NWI Management allocated the biggest weight to Telephone & Data Systems, Inc. (NYSE:TDS), around 1.3% of its portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.46 percent of its 13F equity portfolio to TDS.
Consequently, key money managers were breaking ground themselves. Tudor Investment Corp, managed by Paul Tudor Jones, assembled the biggest position in Telephone & Data Systems, Inc. (NYSE:TDS). Tudor Investment Corp had $2.3 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also made a $1 million investment in the stock during the quarter. The other funds with brand new TDS positions are Bruce Kovner’s Caxton Associates and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Telephone & Data Systems, Inc. (NYSE:TDS) but similarly valued. These stocks are Navient Corp (NASDAQ:NAVI), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), Washington Federal Inc. (NASDAQ:WAFD), and Colony Capital Inc (NYSE:CLNY). All of these stocks’ market caps resemble TDS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NAVI | 30 | 448459 | 4 |
| ARI | 9 | 55577 | -4 |
| WAFD | 14 | 74488 | 5 |
| CLNY | 20 | 420255 | 4 |
| Average | 18.25 | 249695 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $302 million in TDS’s case. Navient Corp (NASDAQ:NAVI) is the most popular stock in this table. On the other hand Apollo Commercial Real Est. Finance Inc (NYSE:ARI) is the least popular one with only 9 bullish hedge fund positions. Telephone & Data Systems, Inc. (NYSE:TDS) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TDS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TDS were disappointed as the stock returned -8.1% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
