At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Commscope Holding Company Inc (NASDAQ:COMM) makes for a good investment right now.
Commscope Holding Company Inc (NASDAQ:COMM) has seen an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that COMM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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.
Andrew Raab of FPR Partners
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 recent hedge fund action encompassing Commscope Holding Company Inc (NASDAQ:COMM).
What does smart money think about Commscope Holding Company Inc (NASDAQ:COMM)?
At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in COMM a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Commscope Holding Company Inc (NASDAQ:COMM) was held by FPR Partners, which reported holding $226.2 million worth of stock at the end of September. It was followed by Maverick Capital with a $225.8 million position. Other investors bullish on the company included Adage Capital Management, Lyrical Asset Management, and Levin Easterly Partners. In terms of the portfolio weights assigned to each position FPR Partners allocated the biggest weight to Commscope Holding Company Inc (NASDAQ:COMM), around 5.17% of its 13F portfolio. Cavalry Asset Management is also relatively very bullish on the stock, setting aside 4.91 percent of its 13F equity portfolio to COMM.
As one would reasonably expect, specific money managers were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, assembled the largest position in Commscope Holding Company Inc (NASDAQ:COMM). Holocene Advisors had $2.3 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $2.2 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Don Morgan’s Brigade Capital, and David Harding’s Winton Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Commscope Holding Company Inc (NASDAQ:COMM). These stocks are Sprouts Farmers Market Inc (NASDAQ:SFM), SVMK Inc. (NASDAQ:SVMK), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), and Covanta Holding Corporation (NYSE:CVA). This group of stocks’ market valuations are closest to COMM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SFM | 23 | 325458 | 1 |
| SVMK | 24 | 277503 | 1 |
| ARNA | 29 | 293133 | 0 |
| CVA | 14 | 102739 | -1 |
| Average | 22.5 | 249708 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $791 million in COMM’s case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand Covanta Holding Corporation (NYSE:CVA) is the least popular one with only 14 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. 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. Hedge funds were also right about betting on COMM as the stock returned 15.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
