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Hedge Funds Are Souring On Telephone & Data Systems, Inc. (TDS)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Telephone & Data Systems, Inc. (NYSE:TDS) based on that data.

Telephone & Data Systems, Inc. (NYSE:TDS) was in 21 hedge funds’ portfolios at the end of the first quarter of 2020. TDS shareholders have witnessed a decrease in hedge fund sentiment recently. There were 22 hedge funds in our database with TDS holdings at the end of the previous quarter. Our calculations also showed that TDS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

According to most investors, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are more than 8000 funds in operation at present, We look at the bigwigs of this group, approximately 850 funds. Most estimates calculate that this group of people preside over most of the hedge fund industry’s total capital, and by tailing their matchless investments, Insider Monkey has discovered a few investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Sander Gerber of Hudson Bay Capital

Sander Gerber of Hudson Bay Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the fresh hedge fund action surrounding Telephone & Data Systems, Inc. (NYSE:TDS).

Hedge fund activity in Telephone & Data Systems, Inc. (NYSE:TDS)

At Q1’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TDS over the last 18 quarters. 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, Renaissance Technologies was the largest shareholder of Telephone & Data Systems, Inc. (NYSE:TDS), with a stake worth $53 million reported as of the end of September. Trailing Renaissance Technologies was GAMCO Investors, which amassed a stake valued at $33.7 million. NWI Management, Millennium Management, and AQR Capital Management 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 Game Creek Capital allocated the biggest weight to Telephone & Data Systems, Inc. (NYSE:TDS), around 1.48% of its 13F portfolio. NWI Management is also relatively very bullish on the stock, earmarking 1.09 percent of its 13F equity portfolio to TDS.

Judging by the fact that Telephone & Data Systems, Inc. (NYSE:TDS) has faced declining sentiment from the smart money, it’s safe to say that there lies a certain “tier” of hedge funds that decided to sell off their positions entirely last quarter. Intriguingly, Steve Cohen’s Point72 Asset Management said goodbye to the biggest position of the 750 funds monitored by Insider Monkey, worth about $18.3 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund dumped about $2.1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Telephone & Data Systems, Inc. (NYSE:TDS). These stocks are Trinity Industries, Inc. (NYSE:TRN), Altair Engineering Inc. (NASDAQ:ALTR), Saia Inc (NASDAQ:SAIA), and Arcosa, Inc. (NYSE:ACA). This group of stocks’ market valuations are similar to TDS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRN 18 621944 -9
ALTR 9 195585 -1
SAIA 13 63362 -4
ACA 17 184066 -3
Average 14.25 266239 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $150 million in TDS’s case. Trinity Industries, Inc. (NYSE:TRN) is the most popular stock in this table. On the other hand Altair Engineering Inc. (NASDAQ:ALTR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Telephone & Data Systems, Inc. (NYSE:TDS) is more popular among hedge funds. 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. Unfortunately TDS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TDS were disappointed as the stock returned 20% during the second quarter (through June 17th) 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 most of these stocks already outperformed the market in 2020.

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