Should I Avoid Crown Castle International Corp. (REIT) (CCI)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Crown Castle International Corp. (REIT) (NYSE:CCI)? The smart money sentiment can provide an answer to this question.

Crown Castle International Corp. (REIT) (NYSE:CCI) was in 42 hedge funds’ portfolios at the end of June. The all time high for this statistic is 47. CCI has experienced a decrease in enthusiasm from smart money recently. There were 43 hedge funds in our database with CCI holdings at the end of March. Our calculations also showed that CCI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Minhua Zhang of Weld Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a look at the fresh hedge fund action surrounding Crown Castle International Corp. (REIT) (NYSE:CCI).

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

At Q2’s end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the first quarter of 2020. By comparison, 43 hedge funds held shares or bullish call options in CCI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the most valuable position in Crown Castle International Corp. (REIT) (NYSE:CCI). Bill & Melinda Gates Foundation Trust has a $992.4 million position in the stock, comprising 4.2% of its 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, managed by Ken Fisher, which holds a $454.7 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism include D. E. Shaw’s D E Shaw, Greg Poole’s Echo Street Capital Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Skylands Capital allocated the biggest weight to Crown Castle International Corp. (REIT) (NYSE:CCI), around 6.54% of its 13F portfolio. Bill & Melinda Gates Foundation Trust is also relatively very bullish on the stock, dishing out 4.16 percent of its 13F equity portfolio to CCI.

Due to the fact that Crown Castle International Corp. (REIT) (NYSE:CCI) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds that decided to sell off their full holdings last quarter. Intriguingly, Stuart J. Zimmer’s Zimmer Partners cut the biggest stake of all the hedgies monitored by Insider Monkey, totaling about $94.7 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also cut its stock, about $14.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Crown Castle International Corp. (REIT) (NYSE:CCI) but similarly valued. These stocks are ConocoPhillips (NYSE:COP), The TJX Companies, Inc. (NYSE:TJX), Cigna Corporation (NYSE:CI), Enbridge Inc (NYSE:ENB), The PNC Financial Services Group Inc. (NYSE:PNC), Brookfield Asset Management Inc. (NYSE:BAM), and Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR). This group of stocks’ market values are similar to CCI’s market value.

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As you can see these stocks had an average of 40.7 hedge funds with bullish positions and the average amount invested in these stocks was $1672 million. That figure was $2094 million in CCI’s case. Cigna Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 19 bullish hedge fund positions. Crown Castle International Corp. (REIT) (NYSE:CCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CCI is 56.9. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and beat the market again by 5.6 percentage points. Unfortunately CCI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CCI were disappointed as the stock returned -10.7% since the end of June (through 10/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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