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Is Cable One Inc (CABO) A Good Stock To Buy?

Is Cable One Inc (NYSE:CABO) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Cable One Inc (NYSE:CABO) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Empire State Realty Trust Inc (NYSE:ESRT), MDU Resources Group Inc (NYSE:MDU), and Pivotal Software, Inc. (NYSE:PVTL) to gather more data points.

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Dmitry Balyasny

We’re going to view the fresh hedge fund action surrounding Cable One Inc (NYSE:CABO).

How are hedge funds trading Cable One Inc (NYSE:CABO)?

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, representing no change from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CABO over the last 13 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

CABO_dec2018

More specifically, SQ Advisors was the largest shareholder of Cable One Inc (NYSE:CABO), with a stake worth $315.5 million reported as of the end of September. Trailing SQ Advisors was Renaissance Technologies, which amassed a stake valued at $195.9 million. Wallace Capital Management, Balyasny Asset Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that Cable One Inc (NYSE:CABO) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers that decided to sell off their positions entirely in the third quarter. Intriguingly, Matthew Tewksbury’s Stevens Capital Management said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, worth about $0.8 million in stock, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt. was right behind this move, as the fund cut about $0.4 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Cable One Inc (NYSE:CABO). These stocks are Empire State Realty Trust Inc (NYSE:ESRT), MDU Resources Group Inc (NYSE:MDU), Pivotal Software, Inc. (NYSE:PVTL), and Stericycle Inc (NASDAQ:SRCL). This group of stocks’ market valuations resemble CABO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ESRT 13 223977 -4
MDU 19 171020 4
PVTL 18 314199 -3
SRCL 20 270362 -4
Average 17.5 244890 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $245 million. That figure was $629 million in CABO’s case. Stericycle Inc (NASDAQ:SRCL) is the most popular stock in this table. On the other hand Empire State Realty Trust Inc (NYSE:ESRT) is the least popular one with only 13 bullish hedge fund positions. Cable One Inc (NYSE:CABO) 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. In this regard SRCL might be a better candidate to consider a long position.

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

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