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Hedge Funds Are Betting On Commscope Holding Company Inc (COMM)

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 Commscope Holding Company Inc (NASDAQ:COMM) based on that data and determine whether they were really smart about the stock.

Commscope Holding Company Inc (NASDAQ:COMM) was in 32 hedge funds’ portfolios at the end of June. The all time high for this statistics is 52. COMM investors should pay attention to an increase in hedge fund interest in recent months. There were 26 hedge funds in our database with COMM holdings at the end of March. Our calculations also showed that COMM isn’t among 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.

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. 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 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a gander at the recent hedge fund action encompassing Commscope Holding Company Inc (NASDAQ:COMM).

How are hedge funds trading Commscope Holding Company Inc (NASDAQ:COMM)?

At second quarter’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in COMM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, FPR Partners was the largest shareholder of Commscope Holding Company Inc (NASDAQ:COMM), with a stake worth $132.4 million reported as of the end of September. Trailing FPR Partners was Adage Capital Management, which amassed a stake valued at $96.5 million. Lyrical Asset Management, Shelter Haven Capital Management, and Levin Easterly Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to Commscope Holding Company Inc (NASDAQ:COMM), around 18.1% of its 13F portfolio. FPR Partners is also relatively very bullish on the stock, dishing out 4.6 percent of its 13F equity portfolio to COMM.

As industrywide interest jumped, specific money managers have jumped into Commscope Holding Company Inc (NASDAQ:COMM) headfirst. Renaissance Technologies, founded by Jim Simons, assembled the biggest position in Commscope Holding Company Inc (NASDAQ:COMM). Renaissance Technologies had $5.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $5.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Rockefeller and KarláKroeker’s Woodline Partners, Jonathan Auerbach’s Hound Partners, and Greg Poole’s Echo Street Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Commscope Holding Company Inc (NASDAQ:COMM) but similarly valued. These stocks are World Fuel Services Corporation (NYSE:INT), Editas Medicine, Inc. (NASDAQ:EDIT), Medifast, Inc. (NYSE:MED), Six Flags Entertainment Corp (NYSE:SIX), Epizyme Inc (NASDAQ:EPZM), Eldorado Gold Corp (NYSE:EGO), and Sogou Inc. (NYSE:SOGO). All of these stocks’ market caps resemble COMM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INT 18 82939 5
EDIT 22 126680 6
MED 18 441390 2
SIX 33 494437 3
EPZM 23 317359 1
EGO 12 224197 -2
SOGO 5 15881 -1
Average 18.7 243269 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $417 million in COMM’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Sogou Inc. (NYSE:SOGO) is the least popular one with only 5 bullish hedge fund positions. Commscope Holding Company Inc (NASDAQ:COMM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COMM is 76.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately COMM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on COMM were disappointed as the stock returned 9.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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