How Centurylink Inc (CTL) Stacks Up Against Its Peers

The market has been volatile due to elections and the potential of another Federal Reserve rate increase. Small cap stocks have been on a tear, as the Russell 2000 ETF (IWM) has outperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of June. SEC filings and hedge fund investor letters indicate that the smart money seems to be getting back in stocks, and the funds’ movements is one of the reasons why small-cap stocks are red hot. In this article, we analyze what the smart money thinks of Centurylink Inc (NYSE:CTL) and find out how it is affected by hedge funds’ moves.

Is Centurylink Inc (NYSE:CTL) a safe investment now? Prominent investors are buying. The number of bullish hedge fund bets moved up by 1 recently. CTL was in 29 hedge funds’ portfolios at the end of the third quarter of 2016. There were 28 hedge funds in our database with CTL positions at the end of June. 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 Expedia Inc (NASDAQ:EXPE), Liberty Interactive Corp (NASDAQ:QVCA), and Nucor Corporation (NYSE:NUE) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

With all of this in mind, let’s take a peek at the recent action regarding Centurylink Inc (NYSE:CTL).

Hedge fund activity in Centurylink Inc (NYSE:CTL)

Heading into the fourth quarter of 2016, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a gain of 4% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Cliff Asness’ AQR Capital Management has the biggest position in Centurylink Inc (NYSE:CTL), worth close to $114.4 million. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $74.2 million position. Some other members of the smart money that are bullish comprise Israel Englander’s Millennium Management, Joel Greenblatt’s Gotham Asset Management and David Costen Haley’s HBK Investments.

As one would reasonably expect, some big names were breaking ground themselves. Maplelane Capital, managed by Leon Shaulov, assembled the most valuable call position in CenturyLink, Inc. (NYSE:CTL). Maplelane Capital had $16.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $5.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, Matthew Tewksbury’s Stevens Capital Management, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Centurylink Inc (NYSE:CTL) but similarly valued. These stocks are Expedia Inc (NASDAQ:EXPE), Liberty Interactive Corp (NASDAQ:QVCA), Nucor Corporation (NYSE:NUE), and Smith & Nephew plc (ADR) (NYSE:SNN). This group of stocks’ market values are closest to CTL’s market value.

As you can see these stocks had an average of 45 hedge funds with bullish positions and the average amount invested in these stocks was $2.12 billion. That figure was $395 million in CTL’s case. Liberty Interactive Corp (NASDAQ:QVCA) is the most popular stock in this table. On the other hand Smith & Nephew plc (ADR) (NYSE:SNN) is the least popular one with only 11 bullish hedge fund positions. Centurylink Inc (NYSE:CTL) 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 QVCA might be a better candidate to consider a long position.

Disclosure: None