At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Cincinnati Bell Inc. (NYSE:CBB).
Cincinnati Bell Inc. (NYSE:CBB) was in 16 hedge funds’ portfolios at the end of the first quarter of 2020. CBB has experienced an increase in enthusiasm from smart money in recent months. There were 15 hedge funds in our database with CBB positions at the end of the previous quarter. Our calculations also showed that CBB 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Halbower of Pentwater Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a peek at the fresh hedge fund action encompassing Cincinnati Bell Inc. (NYSE:CBB).
How are hedge funds trading Cincinnati Bell Inc. (NYSE:CBB)?
Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CBB over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in Cincinnati Bell Inc. (NYSE:CBB). GAMCO Investors has a $20.4 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Pentwater Capital Management, led by Matthew Halbower, holding a $12.6 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions consist of John Orrico’s Water Island Capital, Carl Tiedemann and Michael Tiedemann’s TIG Advisors and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Water Island Capital allocated the biggest weight to Cincinnati Bell Inc. (NYSE:CBB), around 0.83% of its 13F portfolio. Moab Capital Partners is also relatively very bullish on the stock, dishing out 0.81 percent of its 13F equity portfolio to CBB.
Now, key money managers have jumped into Cincinnati Bell Inc. (NYSE:CBB) headfirst. Pentwater Capital Management, managed by Matthew Halbower, established the biggest position in Cincinnati Bell Inc. (NYSE:CBB). Pentwater Capital Management had $12.6 million invested in the company at the end of the quarter. Carl Tiedemann and Michael Tiedemann’s TIG Advisors also made a $5.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Louis Bacon’s Moore Global Investments, Michael M. Rothenberg’s Moab Capital Partners, and Florian Kronawitter’s White Square Capital.
Let’s now review hedge fund activity in other stocks similar to Cincinnati Bell Inc. (NYSE:CBB). We will take a look at Stoke Therapeutics, Inc. (NASDAQ:STOK), AZZ Incorporated (NYSE:AZZ), Medifast, Inc. (NYSE:MED), and Pampa Energia S.A. (NYSE:PAM). This group of stocks’ market valuations match CBB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STOK | 10 | 141230 | 0 |
| AZZ | 17 | 30591 | 1 |
| MED | 16 | 217606 | -3 |
| PAM | 7 | 36956 | -3 |
| Average | 12.5 | 106596 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $65 million in CBB’s case. AZZ Incorporated (NYSE:AZZ) is the most popular stock in this table. On the other hand Pampa Energia S.A. (NYSE:PAM) is the least popular one with only 7 bullish hedge fund positions. Cincinnati Bell Inc. (NYSE:CBB) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately CBB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CBB were disappointed as the stock returned 1.8% 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.
Follow Cincinnati Bell Inc (NYSE:CBB)
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Disclosure: None. This article was originally published at Insider Monkey.
