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Should You Avoid Frontier Communications Corp (FTR)?

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Frontier Communications Corp (NASDAQ:FTR) was in 18 hedge funds’ portfolio at the end of the first quarter of 2013. FTR has experienced a decrease in hedge fund interest in recent months. There were 21 hedge funds in our database with FTR positions at the end of the previous quarter.

If you’d ask most investors, hedge funds are seen as slow, old financial tools of years past. While there are over 8000 funds trading at the moment, we at Insider Monkey hone in on the aristocrats of this club, around 450 funds. Most estimates calculate that this group oversees most of the smart money’s total asset base, and by watching their highest performing equity investments, we have unsheathed a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Equally as key, optimistic insider trading activity is a second way to break down the stock market universe. Obviously, there are a number of motivations for an insider to drop shares of his or her company, but just one, very simple reason why they would buy. Many empirical studies have demonstrated the market-beating potential of this tactic if piggybackers know where to look (learn more here).

Keeping this in mind, it’s important to take a glance at the recent action surrounding Frontier Communications Corp (NASDAQ:FTR).

How have hedgies been trading Frontier Communications Corp (NASDAQ:FTR)?

At Q1’s end, a total of 18 of the hedge funds we track held long positions in this stock, a change of -14% from one quarter earlier. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings significantly.

Should You Buy This 8.5% Yielding Stock?According to our comprehensive database, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Frontier Communications Corp (NASDAQ:FTR). Adage Capital Management has a $135 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Bernard Horn of Polaris Capital Management, with a $47.3 million position; 2.8% of its 13F portfolio is allocated to the stock. Some other hedgies with similar optimism include Chase Coleman and Feroz Dewan’s Tiger Global Management LLC, Richard L. Haydon’s Yield Capital Partners (Y/Cap Management) and Jeffrey Jon Berney’s TriOaks Capital Management.

Due to the fact that Frontier Communications Corp (NASDAQ:FTR) has experienced bearish sentiment from the smart money, it’s safe to say that there exists a select few hedge funds who sold off their entire stakes last quarter. Intriguingly, Prem Watsa’s Fairfax Financial Holdings said goodbye to the largest stake of the “upper crust” of funds we monitor, valued at about $68.7 million in stock., and Paul Tudor Jones of Tudor Investment Corp was right behind this move, as the fund said goodbye to about $17.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds last quarter.

How are insiders trading Frontier Communications Corp (NASDAQ:FTR)?

Bullish insider trading is most useful when the company in question has seen transactions within the past six months. Over the latest 180-day time period, Frontier Communications Corp (NASDAQ:FTR) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Frontier Communications Corp (NASDAQ:FTR). These stocks are Consolidated Communications Holdings Inc (NASDAQ:CNSL), CenturyLink, Inc. (NYSE:CTL), Atlantic Tele-Network, Inc. (NASDAQ:ATNI), Windstream Corporation (NASDAQ:WIN), and TW Telecom Inc (NASDAQ:TWTC). All of these stocks are in the telecom services – domestic industry and their market caps resemble FTR’s market cap.

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