Is SHEN A Good Stock To Buy Now?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Shenandoah Telecommunications Company (NASDAQ:SHEN).

Is SHEN a good stock to buy now? Shenandoah Telecommunications Company (NASDAQ:SHEN) was in 9 hedge funds’ portfolios at the end of September. The all time high for this statistics is 18. SHEN investors should pay attention to an increase in hedge fund sentiment in recent months. There were 8 hedge funds in our database with SHEN positions at the end of the second quarter. Our calculations also showed that SHEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 S&P 500 ETFs by more than 66 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 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.

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Keeping this in mind we’re going to take a glance at the key hedge fund action regarding Shenandoah Telecommunications Company (NASDAQ:SHEN).

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

At third quarter’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SHEN over the last 21 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Shenandoah Telecommunications Company (NASDAQ:SHEN), which was worth $71.9 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $5.3 million worth of shares. Arrowstreet Capital, AltraVue Capital, and AQR Capital Management 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 AltraVue Capital allocated the biggest weight to Shenandoah Telecommunications Company (NASDAQ:SHEN), around 0.56% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to SHEN.

Consequently, specific money managers have jumped into Shenandoah Telecommunications Company (NASDAQ:SHEN) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Shenandoah Telecommunications Company (NASDAQ:SHEN). Arrowstreet Capital had $4.3 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $0.5 million investment in the stock during the quarter. The only other fund with a new position in the stock is Greg Eisner’s Engineers Gate Manager.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Shenandoah Telecommunications Company (NASDAQ:SHEN) but similarly valued. We will take a look at Golub Capital BDC Inc (NASDAQ:GBDC), Glaukos Corporation (NYSE:GKOS), WESCO International, Inc. (NYSE:WCC), LivaNova PLC (NASDAQ:LIVN), Atlas Corp. (NYSE:ATCO), VEON Ltd. (NASDAQ:VEON), and F.N.B. Corp (NYSE:FNB). This group of stocks’ market valuations are closest to SHEN’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $85 million in SHEN’s case. WESCO International, Inc. (NYSE:WCC) is the most popular stock in this table. On the other hand VEON Ltd. (NASDAQ:VEON) is the least popular one with only 8 bullish hedge fund positions. Shenandoah Telecommunications Company (NASDAQ:SHEN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SHEN is 23.4. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately SHEN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SHEN investors were disappointed as the stock returned 1.9% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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