Is CCOI Stock A Buy or Sell?

In this article we will take a look at whether hedge funds think Cogent Communications Holdings Inc. (NASDAQ:CCOI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is CCOI stock a buy? Money managers were in a bearish mood. The number of long hedge fund positions shrunk by 5 in recent months. Cogent Communications Holdings Inc. (NASDAQ:CCOI) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 30. Our calculations also showed that CCOI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Stuart Zimmer of Zimmer Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Now we’re going to go over the latest hedge fund action encompassing Cogent Communications Holdings Inc. (NASDAQ:CCOI).

Do Hedge Funds Think CCOI Is A Good Stock To Buy Now?

At the end of December, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in CCOI a year ago. 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, Renaissance Technologies was the largest shareholder of Cogent Communications Holdings Inc. (NASDAQ:CCOI), with a stake worth $161.5 million reported as of the end of December. Trailing Renaissance Technologies was MIG Capital, which amassed a stake valued at $60.3 million. Zimmer Partners, SG Capital Management, and GLG Partners 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 MIG Capital allocated the biggest weight to Cogent Communications Holdings Inc. (NASDAQ:CCOI), around 5.46% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, setting aside 4.59 percent of its 13F equity portfolio to CCOI.

Since Cogent Communications Holdings Inc. (NASDAQ:CCOI) has witnessed falling interest from the smart money, it’s easy to see that there lies a certain “tier” of money managers that decided to sell off their entire stakes by the end of the fourth quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management said goodbye to the largest stake of all the hedgies watched by Insider Monkey, worth an estimated $12.9 million in stock, and Valerie Malter’s Matarin Capital was right behind this move, as the fund dumped about $2.8 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 5 funds by the end of the fourth quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Cogent Communications Holdings Inc. (NASDAQ:CCOI) but similarly valued. These stocks are Evertec Inc (NYSE:EVTC), Telecom Argentina S.A. (NYSE:TEO), Outfront Media Inc. (REIT) (NYSE:OUT), Inovalon Holdings Inc (NASDAQ:INOV), Dana Incorporated (NYSE:DAN), Mr. Cooper Group Inc. (NASDAQ:COOP), and IGM Biosciences, Inc. (NASDAQ:IGMS). This group of stocks’ market valuations are similar to CCOI’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $412 million. That figure was $357 million in CCOI’s case. Outfront Media Inc. (REIT) (NYSE:OUT) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 6 bullish hedge fund positions. Cogent Communications Holdings Inc. (NASDAQ:CCOI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CCOI is 49.6. 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 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on CCOI as the stock returned 16.6% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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