Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Commscope Holding Company Inc (NASDAQ:COMM) was in 23 hedge funds’ portfolios at the end of March. COMM shareholders have witnessed a decrease in hedge fund sentiment in recent months. There were 28 hedge funds in our database with COMM holdings at the end of the previous quarter. Our calculations also showed that comm 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 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 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to view the fresh hedge fund action surrounding Commscope Holding Company Inc (NASDAQ:COMM).
What does the smart money think about Commscope Holding Company Inc (NASDAQ:COMM)?
At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards COMM over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, FPR Partners was the largest shareholder of Commscope Holding Company Inc (NASDAQ:COMM), with a stake worth $252.6 million reported as of the end of March. Trailing FPR Partners was Maverick Capital, which amassed a stake valued at $218.2 million. Route One Investment Company, AQR Capital Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Commscope Holding Company Inc (NASDAQ:COMM) has experienced falling interest from the smart money, it’s easy to see that there were a few hedge funds that elected to cut their entire stakes last quarter. Interestingly, Alexander Roepers’s Atlantic Investment Management said goodbye to the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising about $48.2 million in stock, and Thomas Bancroft’s Makaira Partners was right behind this move, as the fund cut about $4.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Commscope Holding Company Inc (NASDAQ:COMM). We will take a look at Spire Inc. (NYSE:SR), Performance Food Group Company (NYSE:PFGC), Gates Industrial Corporation plc (NYSE:GTES), and Six Flags Entertainment Corp (NYSE:SIX). This group of stocks’ market caps match COMM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SR | 15 | 100138 | 2 |
| PFGC | 25 | 192437 | 7 |
| GTES | 9 | 9016 | 1 |
| SIX | 30 | 650171 | 7 |
| Average | 19.75 | 237941 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $238 million. That figure was $1123 million in COMM’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Gates Industrial Corporation plc (NYSE:GTES) is the least popular one with only 9 bullish hedge fund positions. Commscope Holding Company Inc (NASDAQ:COMM) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately COMM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on COMM were disappointed as the stock returned -22.2% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
