Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Frontier Communications Corp (NASDAQ:FTR).
Frontier Communications Corp (NASDAQ:FTR) has experienced a decrease in enthusiasm from smart money recently. FTR was in 24 hedge funds’ portfolios at the end of the third quarter of 2016. There were 25 hedge funds in our database with FTR holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as TreeHouse Foods Inc. (NYSE:THS), Black Knight Financial Services Inc (NYSE:BKFS), and Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) to gather more data points.
Follow Frontier Communications Parent Inc. (NASDAQ:FYBR)
Follow Frontier Communications Parent Inc. (NASDAQ:FYBR)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about Frontier Communications Corp (NASDAQ:FTR)?
Heading into the fourth quarter of 2016, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a 4% slide from the second quarter of 2016. That represents the fourth-straight quarter in which hedge fund ownership of the stock has fallen, a worrisome signal. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, OZ Management, managed by Daniel S. Och, holds the biggest position in Frontier Communications Corp (NASDAQ:FTR). OZ Management has a $20.8 million position in the stock. Coming in second is Renaissance Technologies, led by Jim Simons, holding a $17.2 million position. Remaining members of the smart money that hold long positions encompass Bernard Horn’s Polaris Capital Management, Larry Petrella and Michael Siminerio’s PineView Asset Management and Ken Griffin’s Citadel Investment Group.
Because Frontier Communications Corp (NASDAQ:FTR) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of funds who sold off their full holdings in the third quarter. Interestingly, Brian Ashford-Russell and Tim Woolley’s Polar Capital sold off the largest stake of all the hedgies monitored by Insider Monkey, totaling about $23 million in stock. Howard Marks’ fund, Oaktree Capital Management, also dropped its stock, about $16.5 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 fund in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Frontier Communications Corp (NASDAQ:FTR). These stocks are TreeHouse Foods Inc. (NYSE:THS), Black Knight Financial Services Inc (NYSE:BKFS), Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC), and KAR Auction Services Inc (NYSE:KAR). This group of stocks’ market values are similar to FTR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THS | 21 | 297758 | -3 |
| BKFS | 9 | 15797 | -2 |
| PAC | 5 | 65220 | -1 |
| KAR | 35 | 910965 | -1 |
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $322 million. That figure was $136 million in FTR’s case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) is the least popular one with only 5 bullish hedge fund positions. Frontier Communications Corp (NASDAQ:FTR) 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. In this regard KAR might be a better candidate to consider a long position in.
Disclosure: None
