Cablevision Systems Corporation (CVC) Lifted On FBN’s ‘Outperform’ Initiation: Hedge Funds Disagree

Cablevision Systems Corporation (NYSE:CVC) was lifted as high as $27.04 per share today, or up 8.73% from its closing price of $24.87 per share yesterday, on the back of FBN Securities initiating coverage on the stock with a rating of ‘Outperform’. As of writing, the stock is still up over 7% from its close yesterday. The bullish stance from FBN is opposite the stand of the last analyst firm which weighed in on the stock. Moffett Nathanson, in a note on June 25, reiterated its ‘Sell’ rating on the stock and downgraded its price target to $8 per share from $9 per share, about 70% beneath its current price, an uncharacteristically ultra-bearish sentiment from an analyst. Other analyst firms appear to agree with FBN, however, as Wunderlich, in a note to clients on June 16, increased its price target on the stock to $26 from $21. Wunderlich has a ‘Hold’ rating on CVC. The stock has climbed by 26.42% year-to-date while in the last 12 months, it has soared by 47.08%. Cablevision last reported earning in May, beating both on earnings and revenue for its first quarter.  It reported adjusted earnings of $0.20 per share, on $1.61 billion in revenue. Wall Street was expecting an adjusted EPS of $0.17 on revenues of $1.61 billion.

 Cablevision Systems Corporation (CVC), NYSE:CVC, Yahoo Finance,

The bullish FBN Securities note comes as hedge funds turned bearish on Cablevision Systems Corporation (NYSE:CVC) during the first quarter. By March 31, a total of 29 of the hedge funds tracked by Insider Monkey were bullish in this stock, up 16% from the previous quarter. The total value of their holdings decreased, however, by 24.37% to $550.4 million by the end of March from $727.75 million at the end of 2014. This blow is negated to an extent, nonetheless, by the fact that the stock declined 11.34% in the first quarter. Even so, the decrease in holdings value is certainly a bearish signal.

An everyday investor does not have the time or the required skill-set to carry out an in-depth analysis of equities and identify companies with the best future prospects like a fund with the knowledge and resources can. However, it is also not a good idea to pay the egregiously high fees that investment firms charge for their stock-picking expertise. Thus, a retail investor is better off to monkey the most popular stock picks among hedge funds by him or herself. But not just any picks, mind you. Our research has shown that a portfolio based on hedge funds’ top stock picks (which are invariably comprised entirely of large-cap companies) falls considerably short of a portfolio based on their best small-cap stock picks. The most popular large-cap stocks among hedge funds underperformed the market by an average of seven basis points per month in our back tests whereas the 15 most popular small-cap stock picks among hedge funds outperformed the market by nearly a percentage point per month over the same period between 1999 and 2012. Since officially launching our small-cap strategy in August 2012 it has performed just as predicted, beating the market by over 80 percentage points and returning over 135%, while hedge funds themselves have collectively underperformed the market (read the details here).

As for insider transactions, which Insider Monkey also looks at, Cablevision insiders have not purchased any shares this year. The most recent sale, however, involved 180,000 shares and was made on June 4 by CEO James Lawrence Dolan.

With all of this in mind, let’s analyze the latest trading  action encompassing Cablevision Systems Corporation.

Hedge fund activity in Cablevision Systems Corporation (NYSE:CVC)

When looking at the hedgies followed by Insider Monkey, Mario Gabelli’s GAMCO Investors had the number one position in Cablevision Systems Corporation (NYSE:CVC), with 11.79 million shares worth about $215.68 million. John Paulson’s Paulson & Co came in second with a $153.7 million stake held in 8.4 million shares. Coming in third was Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $40.9 million position of 2.23 million shares. Like-minded members of the smart money that were bullish consist of David Harding’s Winton Capital Management, Clint Carlson’s Carlson Capital, and Israel Englander’s Millennium Management.

As industrywide interest jumped in terms of number of funds long in Cablevision, some big names were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, established the largest position in Cablevision Systems Corporation (NYSE:CVC). Laurion Capital Management had $9.2 million invested in the company at the end of the quarter by buying 502,600 shares. Among the bearish, John Thaler of JAT Capital Management led, as he dumped his entire $66.37 million stake in the first quarter, made up of 3.22 million shares.

Cablevision Systems Corporation (NYSE:CVC) is not a stock we can recommend buying at the moment, owing to the bearish sentiment cast by hedge funds on the stock and the extremely bearish sentiment of at least one analyst. We don’t believe one FBN analyst outweighs the opinions of the smart money (or even simply, the opinion of another analyst).

Disclosure: None