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Did Hedge Funds Drop The Ball On Altice USA, Inc. (ATUS) ?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Altice USA, Inc. (NYSE:ATUS).

Is Altice USA, Inc. (NYSE:ATUS) a buy, sell, or hold? Prominent investors are becoming less confident. The number of bullish hedge fund positions retreated by 7 in recent months. Our calculations also showed that ATUS isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are perceived as worthless, outdated investment vehicles of yesteryear. While there are over 8000 funds in operation today, We choose to focus on the upper echelon of this club, approximately 750 funds. It is estimated that this group of investors direct bulk of the smart money’s total capital, and by tailing their best picks, Insider Monkey has determined several investment strategies that have historically outstripped the market. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

ATUS_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the key hedge fund action surrounding Altice USA, Inc. (NYSE:ATUS).

How are hedge funds trading Altice USA, Inc. (NYSE:ATUS)?

At Q2’s end, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. By comparison, 38 hedge funds held shares or bullish call options in ATUS a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

John Armitage Egerton Capital

Among these funds, Soroban Capital Partners held the most valuable stake in Altice USA, Inc. (NYSE:ATUS), which was worth $511.4 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $385.2 million worth of shares. Moreover, Palestra Capital Management, Renaissance Technologies, and Zimmer Partners were also bullish on Altice USA, Inc. (NYSE:ATUS), allocating a large percentage of their portfolios to this stock.

Due to the fact that Altice USA, Inc. (NYSE:ATUS) has faced falling interest from hedge fund managers, we can see that there lies a certain “tier” of fund managers that elected to cut their positions entirely last quarter. At the top of the heap, George Soros’s Soros Fund Management cut the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling close to $35.4 million in stock. David Fiszel’s fund, Honeycomb Asset Management, also dropped its stock, about $15 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 7 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Altice USA, Inc. (NYSE:ATUS) but similarly valued. We will take a look at Freeport-McMoRan Inc. (NYSE:FCX), CMS Energy Corporation (NYSE:CMS), Nasdaq, Inc. (NASDAQ:NDAQ), and The Cooper Companies, Inc. (NYSE:COO). This group of stocks’ market valuations resemble ATUS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FCX 33 1184030 -9
CMS 22 666320 0
NDAQ 20 115423 4
COO 28 983218 0
Average 25.75 737248 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $737 million. That figure was $2880 million in ATUS’s case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand Nasdaq, Inc. (NASDAQ:NDAQ) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Altice USA, Inc. (NYSE:ATUS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ATUS as the stock returned 17.8% during Q3 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.

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

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