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Hedge Funds Have Never Been This Bullish On United States Cellular Corporation (USM)

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in United States Cellular Corporation (NYSE:USM)? The smart money sentiment can provide an answer to this question.

United States Cellular Corporation (NYSE:USM) investors should be aware of an increase in enthusiasm from smart money recently. USM was in 21 hedge funds’ portfolios at the end of December. There were 18 hedge funds in our database with USM holdings at the end of the previous quarter. Our calculations also showed that USM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

To the average investor there are tons of signals shareholders have at their disposal to evaluate their holdings. A couple of the less known signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best money managers can outclass the market by a very impressive amount (see the details here).

Thomas Sandell

Tom Sandell of Sandell Asset Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the key hedge fund action regarding United States Cellular Corporation (NYSE:USM).

What have hedge funds been doing with United States Cellular Corporation (NYSE:USM)?

Heading into the first quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in USM over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the largest position in United States Cellular Corporation (NYSE:USM). GAMCO Investors has a $63.5 million position in the stock, comprising 0.5% of its 13F portfolio. On GAMCO Investors’s heels is Renaissance Technologies, which holds a $24.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to United States Cellular Corporation (NYSE:USM), around 0.88% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, dishing out 0.51 percent of its 13F equity portfolio to USM.

As aggregate interest increased, some big names have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the largest position in United States Cellular Corporation (NYSE:USM). Two Sigma Advisors had $1.5 million invested in the company at the end of the quarter. Jonathan Soros’s JS Capital also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Tom Sandell’s Sandell Asset Management, and Mika Toikka’s AlphaCrest Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as United States Cellular Corporation (NYSE:USM) but similarly valued. We will take a look at FS KKR Capital Corp. (NYSE:FSK), CenterState Bank Corporation (NASDAQ:CSFL), Amkor Technology, Inc. (NASDAQ:AMKR), and Legg Mason, Inc. (NYSE:LM). All of these stocks’ market caps resemble USM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FSK 28 234006 2
CSFL 16 77742 3
AMKR 29 198950 2
LM 37 434299 9
Average 27.5 236249 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $236 million. That figure was $133 million in USM’s case. Legg Mason, Inc. (NYSE:LM) is the most popular stock in this table. On the other hand CenterState Bank Corporation (NASDAQ:CSFL) is the least popular one with only 16 bullish hedge fund positions. United States Cellular Corporation (NYSE:USM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on USM, though not to the same extent, as the stock returned -20.7% during the same time period and outperformed the market.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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