Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards CyrusOne Inc (NASDAQ:CONE) to find out whether there were any major changes in hedge funds’ views.
Hedge fund interest in CyrusOne Inc (NASDAQ:CONE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CONE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 AerCap Holdings N.V. (NYSE:AER), First Citizens BancShares Inc. (NASDAQ:FCNCA), and Encompass Health Corporation (NYSE:EHC) to gather more data points.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a look at the recent hedge fund action regarding CyrusOne Inc (NASDAQ:CONE).
Do Hedge Funds Think CONE Is A Good Stock To Buy Now?
At the end of March, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 31 hedge funds with a bullish position in CONE a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Barry Rosenstein’s JANA Partners has the biggest position in CyrusOne Inc (NASDAQ:CONE), worth close to $37.3 million, corresponding to 2.5% of its total 13F portfolio. On JANA Partners’s heels is Long Pond Capital, led by John Khoury, holding a $36.6 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Remaining peers that are bullish comprise Ken Fisher’s Fisher Asset Management, Dmitry Balyasny’s Balyasny Asset Management and Louis Bacon’s Moore Global Investments. In terms of the portfolio weights assigned to each position Zeno Research allocated the biggest weight to CyrusOne Inc (NASDAQ:CONE), around 7.85% of its 13F portfolio. Marlowe Partners is also relatively very bullish on the stock, designating 7.67 percent of its 13F equity portfolio to CONE.
Because CyrusOne Inc (NASDAQ:CONE) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of money managers who sold off their entire stakes in the first quarter. Intriguingly, Eduardo Abush’s Waterfront Capital Partners said goodbye to the largest investment of all the hedgies watched by Insider Monkey, valued at an estimated $11.9 million in stock, and Stuart J. Zimmer’s Zimmer Partners was right behind this move, as the fund dumped about $7.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to CyrusOne Inc (NASDAQ:CONE). These stocks are AerCap Holdings N.V. (NYSE:AER), First Citizens BancShares Inc. (NASDAQ:FCNCA), Encompass Health Corporation (NYSE:EHC), Kimco Realty Corp (NYSE:KIM), Oshkosh Corporation (NYSE:OSK), Autoliv Inc. (NYSE:ALV), and New Fortress Energy LLC (NASDAQ:NFE). This group of stocks’ market values are similar to CONE’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $638 million. That figure was $202 million in CONE’s case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand New Fortress Energy LLC (NASDAQ:NFE) is the least popular one with only 12 bullish hedge fund positions. CyrusOne Inc (NASDAQ:CONE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CONE is 37.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on CONE, though not to the same extent, as the stock returned 10% since the end of Q1 (through July 16th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.