We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Cable One Inc (NYSE:CABO).
Is Cable One Inc (NYSE:CABO) going to take off soon? The best stock pickers are in a bearish mood. The number of bullish hedge fund bets dropped by 2 lately. Our calculations also showed that CABO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CABO was in 13 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with CABO holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the key hedge fund action surrounding Cable One Inc (NYSE:CABO).
What does smart money think about Cable One Inc (NYSE:CABO)?
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CABO over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the most valuable position in Cable One Inc (NYSE:CABO). Renaissance Technologies has a $363 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is Wallace Capital Management, led by Scott Wallace, holding a $73.5 million position; the fund has 9.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism encompass Cliff Asness’s AQR Capital Management, Noam Gottesman’s GLG Partners and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Wallace Capital Management allocated the biggest weight to Cable One Inc (NYSE:CABO), around 9.63% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.31 percent of its 13F equity portfolio to CABO.
Seeing as Cable One Inc (NYSE:CABO) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedge funds who sold off their positions entirely heading into Q4. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest position of the 750 funds tracked by Insider Monkey, worth close to $6.6 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace, also sold off its stock, about $2.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Cable One Inc (NYSE:CABO). We will take a look at Jones Lang LaSalle Inc (NYSE:JLL), Old Republic International Corporation (NYSE:ORI), Hubbell Incorporated (NYSE:HUBB), and FLIR Systems, Inc. (NASDAQ:FLIR). This group of stocks’ market caps are closest to CABO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JLL | 26 | 1081252 | 3 |
| ORI | 17 | 417709 | -4 |
| HUBB | 23 | 383354 | 5 |
| FLIR | 22 | 269438 | 2 |
| Average | 22 | 537938 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $538 million. That figure was $495 million in CABO’s case. Jones Lang LaSalle Inc (NYSE:JLL) is the most popular stock in this table. On the other hand Old Republic International Corporation (NYSE:ORI) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Cable One Inc (NYSE:CABO) is even less popular than ORI. Hedge funds clearly dropped the ball on CABO as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on CABO as the stock returned 22.5% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
