How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Altice USA, Inc. (NYSE:ATUS).
Is ATUS stock a buy or sell? The smart money was getting less bullish. The number of bullish hedge fund bets decreased by 6 lately. Altice USA, Inc. (NYSE:ATUS) was in 56 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 62. Our calculations also showed that ATUS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Stuart Zimmer of Zimmer Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). With all of this in mind we’re going to take a look at the latest hedge fund action regarding Altice USA, Inc. (NYSE:ATUS).
Do Hedge Funds Think ATUS Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 54 hedge funds with a bullish position in ATUS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Altice USA, Inc. (NYSE:ATUS) was held by Soroban Capital Partners, which reported holding $1174 million worth of stock at the end of December. It was followed by Palestra Capital Management with a $331.8 million position. Other investors bullish on the company included Egerton Capital Limited, Pelham Capital, and Zimmer Partners. In terms of the portfolio weights assigned to each position Simcoe Capital Management allocated the biggest weight to Altice USA, Inc. (NYSE:ATUS), around 24.93% of its 13F portfolio. Pelham Capital is also relatively very bullish on the stock, setting aside 18.1 percent of its 13F equity portfolio to ATUS.
Since Altice USA, Inc. (NYSE:ATUS) has witnessed bearish sentiment from the smart money, we can see that there is a sect of hedgies that elected to cut their positions entirely last quarter. Intriguingly, Renaissance Technologies dumped the largest investment of all the hedgies followed by Insider Monkey, comprising about $121 million in stock, and Robert Pohly’s Samlyn Capital was right behind this move, as the fund cut about $77.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 6 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Altice USA, Inc. (NYSE:ATUS) but similarly valued. These stocks are CBRE Group, Inc. (NYSE:CBRE), West Pharmaceutical Services Inc. (NYSE:WST), United Microelectronics Corp (NYSE:UMC), Zebra Technologies Corporation (NASDAQ:ZBRA), CGI Inc. (NYSE:GIB), Canon Inc. (NYSE:CAJ), and Synchrony Financial (NYSE:SYF). This group of stocks’ market caps match ATUS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBRE | 31 | 2119045 | 7 |
| WST | 34 | 455821 | -7 |
| UMC | 12 | 190662 | 1 |
| ZBRA | 41 | 910955 | -3 |
| GIB | 15 | 128389 | -5 |
| CAJ | 7 | 58073 | 0 |
| SYF | 50 | 2464559 | 4 |
| Average | 27.1 | 903929 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $904 million. That figure was $4476 million in ATUS’s case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Altice USA, Inc. (NYSE:ATUS) is more popular among hedge funds. Our overall hedge fund sentiment score for ATUS is 76.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately ATUS wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on ATUS were disappointed as the stock returned -9.5% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Altice Usa Inc. (NYSE:ATUS)
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Disclosure: None. This article was originally published at Insider Monkey.
