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Charter Communications (CHTR) Is Still A Popular Hedge Fund Pick

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Charter Communications, Inc. (NASDAQ:CHTR) based on that data and determine whether they were really smart about the stock.

Charter Communications, Inc. (NASDAQ:CHTR) has experienced a decrease in activity from the world’s largest hedge funds in recent months. Charter Communications, Inc. (NASDAQ:CHTR) was in 96 hedge funds’ portfolios at the end of June. The all time high for this statistics is 134. There were 104 hedge funds in our database with CHTR positions at the end of the previous quarter. nevertheless CHTR still managed to rank #21 in our list of the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out ideas like this under-the-radar stock to identify the next tenbagger. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a look at the fresh hedge fund action regarding Charter Communications, Inc. (NASDAQ:CHTR).

How have hedgies been trading Charter Communications, Inc. (NASDAQ:CHTR)?

At Q2’s end, a total of 96 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. By comparison, 66 hedge funds held shares or bullish call options in CHTR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Charter Communications, Inc. (NASDAQ:CHTR) was held by Berkshire Hathaway, which reported holding $2659.1 million worth of stock at the end of September. It was followed by Egerton Capital Limited with a $1130.7 million position. Other investors bullish on the company included AltaRock Partners, Renaissance Technologies, and BlueSpruce Investments. In terms of the portfolio weights assigned to each position Hengistbury Investment Partners allocated the biggest weight to Charter Communications, Inc. (NASDAQ:CHTR), around 31.45% of its 13F portfolio. AltaRock Partners is also relatively very bullish on the stock, setting aside 30.1 percent of its 13F equity portfolio to CHTR.

Because Charter Communications, Inc. (NASDAQ:CHTR) has witnessed falling interest from hedge fund managers, it’s easy to see that there were a few hedgies that decided to sell off their full holdings by the end of the second quarter. Interestingly, Doug Silverman and Alexander Klabin’s Senator Investment Group said goodbye to the biggest investment of the 750 funds monitored by Insider Monkey, totaling about $61.1 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $58.9 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 8 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks similar to Charter Communications, Inc. (NASDAQ:CHTR). We will take a look at Wells Fargo & Company (NYSE:WFC), BHP Group (NYSE:BBL), The Boeing Company (NYSE:BA), PetroChina Company Limited (NYSE:PTR), Pinduoduo Inc. (NASDAQ:PDD), QUALCOMM, Incorporated (NASDAQ:QCOM), and Lockheed Martin Corporation (NYSE:LMT). This group of stocks’ market values are similar to CHTR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WFC 86 10344809 10
BBL 22 919411 1
BA 39 1280437 -15
PTR 6 63660 -1
PDD 30 4149572 2
QCOM 74 2202796 14
LMT 53 1553657 -2
Average 44.3 2930620 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.3 hedge funds with bullish positions and the average amount invested in these stocks was $2.9 billion. That figure was $11.2 billion in CHTR’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Charter Communications, Inc. (NASDAQ:CHTR) is more popular among hedge funds. Our overall hedge fund sentiment score for CHTR is 68.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 28.2% in 2020 through August 24th but still managed to beat the market by 20.6 percentage points. Hedge funds were also right about betting on CHTR as the stock returned 20.1% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.