Verizon Communications Inc. (VZ)’s Results Affected by Union Strike

It looks like the 40 thousand employee union strike at Verizon Communications Inc. (NYSE:VZ) is starting to bite. As the strike passes its sixth week, Verizon CEO Lowell McAdam recently warned that the strike could negatively affect the telecom’s second quarter results. Because of the strike, the analysts at Wells Fargo cut their wire-line revenue estimate for Verizon by $343 million for the second quarter and by $826 million for all of 2016. Given the CEO’s new statement, the analysts could cut those estimates even further. The Verizon workers are going on strike because they want better security against future relocation moves and other flexibility steps that Verizon wants to enact. Verizon is set to report its results on July 26. The news will most likely disappoint hedge funds that have been piling into Verizon Communications during the first quarter.

Is Verizon Communications Inc. (NYSE:VZ) a cheap stock to buy now? The smart money is taking a bullish view. The number of long hedge fund bets went up by nine in recent months. At the end of this article we will also compare VZ to other stocks, including Wal-Mart Stores, Inc. (NYSE:WMT), JPMorgan Chase & Co. (NYSE:JPM), and The Coca-Cola Company (NYSE:KO) to get a better sense of its popularity.

To most investors, hedge funds are viewed as underperforming, old investment tools of the past. While there are over 8000 funds in operation today, We choose to focus on the masters of this group, about 700 funds. These money managers administer the majority of all hedge funds’ total capital, and by monitoring their unrivaled equity investments, Insider Monkey has uncovered several investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

At the end of the first quarter, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the biggest position in Verizon Communications Inc. (NYSE:VZ), worth close to $811.3 million, corresponding to 0.6% of its total 13F portfolio. Coming in second is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, with a $430.7 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Cliff Asness’s AQR Capital Management and Neal Shah’s Valtura Capital Partners.

Seeing that Verizon registered an increase in popularity, let’s take a closer look at some funds that initiated stakes in Verizon during the first quarter of 2016 on the next page.

As one would reasonably expect, key money managers have been driving this bullishness. Arrowstreet Capital assembled the largest position in Verizon Communications Inc. (NYSE:VZ). Neal Shah’s Valtura Capital Partners also initiated a $148.4 million position during the quarter. The following funds were also among the new VZ investors: Robert B. Gillam’s McKinley Capital Management, Stanley Druckenmiller’s Duquesne Capital, and Steve Cohen’s Point72 Asset Management.

Let’s check out hedge fund activity in other stocks similar to Verizon Communications Inc. (NYSE:VZ). We will take a look at Wal-Mart Stores, Inc. (NYSE:WMT), JPMorgan Chase & Co. (NYSE:JPM), The Coca-Cola Company (NYSE:KO), and Anheuser-Busch InBev NV (ADR) (NYSE:BUD). All of these stocks’ market caps are similar to VZ’s market cap.

As you can see these stocks had an average of 61 hedge funds with bullish positions and the average amount invested in these stocks was $10430 million. That figure was $2805 million in VZ’s case. JPMorgan Chase & Co. (NYSE:JPM) is the most popular stock in this table. On the other hand Anheuser-Busch InBev NV (ADR) (NYSE:BUD) is the least popular one with only 32 bullish hedge fund positions. Verizon Communications Inc. (NYSE:VZ) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard JPM might be a better candidate to consider a long position.

Disclosure: None