Hedge Funds Aren’t Crazy About CyrusOne Inc (CONE) Anymore

We started seeing tectonic shifts in the market during the third quarter. Small-cap stocks underperformed the large-cap stocks by more than 10 percentage points between the end of June 2015 and the end of June 2016. A mean reversion in trends bumped small-cap stocks’ return to almost 9% in Q3, outperforming their large-cap peers by 5 percentage points. The momentum in small-cap space hasn’t subsided during this quarter either. Small-cap stocks beat large-cap stocks by another 5 percentage points during the first 7 weeks of this quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were boosting their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards CyrusOne Inc (NASDAQ:CONE).

CyrusOne Inc (NASDAQ:CONE) was in 32 hedge funds’ portfolios at the end of the third quarter of 2016. CONE has seen a decrease in hedge fund sentiment in recent months. There were 35 hedge funds in our database with CONE holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Arista Networks Inc (NYSE:ANET), Dun & Bradstreet Corp (NYSE:DNB), and Healthcare Trust Of America Inc (NYSE:HTA) to gather more data points.

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What have hedge funds been doing with CyrusOne Inc (NASDAQ:CONE)?

At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 9% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Marshall Wace LLP, managed by Paul Marshall and Ian Wace, holds the number one position in CyrusOne Inc (NASDAQ:CONE). Marshall Wace LLP has a $51.7 million position in the stock, and the second most bullish fund manager is Israel Englander of Millennium Management, with a $46.8 million position. Remaining professional money managers that are bullish contain Greg Poole’s Echo Street Capital Management, D. E. Shaw’s D E Shaw and Seymour Sy Kaufman and Michael Stark’s Crosslink Capital.

Judging by the fact that CyrusOne Inc (NASDAQ:CONE) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies who sold off their full holdings last quarter. Interestingly, Louis Bacon’s Moore Global Investments said goodbye to the biggest position of the 700 funds watched by Insider Monkey, comprising close to $19.5 million in stock. Ben Gambill’s fund, Tiger Eye Capital, also dropped its stock, about $10.8 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CyrusOne Inc (NASDAQ:CONE) but similarly valued. We will take a look at Arista Networks Inc (NYSE:ANET), Dun & Bradstreet Corp (NYSE:DNB), Healthcare Trust Of America Inc (NYSE:HTA), and First American Financial Corp (NYSE:FAF). This group of stocks’ market valuations are closest to CONE’s market valuation.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $238 million. That figure was $302 million in CONE’s case. First American Financial Corp (NYSE:FAF) is the most popular stock in this table. On the other hand Healthcare Trust Of America Inc (NYSE:HTA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks CyrusOne Inc (NASDAQ:CONE) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None