We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether Shenandoah Telecommunications Company (NASDAQ:SHEN) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Shenandoah Telecommunications Company (NASDAQ:SHEN) investors should be aware of a decrease in activity from the world’s largest hedge funds of late. SHEN was in 10 hedge funds’ portfolios at the end of December. There were 17 hedge funds in our database with SHEN holdings at the end of the previous quarter. Our calculations also showed that SHEN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the eyes of most market participants, hedge funds are seen as unimportant, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open today, We look at the moguls of this group, around 850 funds. It is estimated that this group of investors direct the majority of all hedge funds’ total capital, and by shadowing their unrivaled picks, Insider Monkey has spotted numerous investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the latest hedge fund action surrounding Shenandoah Telecommunications Company (NASDAQ:SHEN).
Hedge fund activity in Shenandoah Telecommunications Company (NASDAQ:SHEN)
At Q4’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -41% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SHEN over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Shenandoah Telecommunications Company (NASDAQ:SHEN) was held by Renaissance Technologies, which reported holding $65.2 million worth of stock at the end of September. It was followed by AltraVue Capital with a $6.9 million position. Other investors bullish on the company included GAMCO Investors, AQR Capital Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position AltraVue Capital allocated the biggest weight to Shenandoah Telecommunications Company (NASDAQ:SHEN), around 3.41% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to SHEN.
Because Shenandoah Telecommunications Company (NASDAQ:SHEN) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds who sold off their positions entirely last quarter. At the top of the heap, Israel Englander’s Millennium Management sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising about $7.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also cut its stock, about $3.7 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 7 funds last quarter.
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. These stocks are Installed Building Products Inc (NYSE:IBP), Compass Minerals International, Inc. (NYSE:CMP), Pretium Resources Inc (NYSE:PVG), and Retail Opportunity Investments Corp (NASDAQ:ROIC). This group of stocks’ market caps are similar to SHEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBP | 24 | 178875 | 3 |
| CMP | 13 | 164740 | -2 |
| PVG | 24 | 120345 | 2 |
| ROIC | 21 | 99614 | 1 |
| Average | 20.5 | 140894 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $81 million in SHEN’s case. Installed Building Products Inc (NYSE:IBP) is the most popular stock in this table. On the other hand Compass Minerals International, Inc. (NYSE:CMP) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Shenandoah Telecommunications Company (NASDAQ:SHEN) is even less popular than CMP. Hedge funds clearly dropped the ball on SHEN 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on SHEN as the stock returned 23.9% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
