While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Cincinnati Bell Inc. (NYSE:CBB).
Is CBB a good stock to buy now? Cincinnati Bell Inc. (NYSE:CBB) shareholders have witnessed an increase in hedge fund sentiment recently. Cincinnati Bell Inc. (NYSE:CBB) was in 16 hedge funds’ portfolios at the end of September. The all time high for this statistic is 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 15 hedge funds in our database with CBB holdings at the end of June. Our calculations also showed that CBB isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In today’s marketplace there are plenty of gauges investors use to value publicly traded companies. Some of the less known gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top money managers can trounce the market by a healthy margin (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to view the key hedge fund action regarding Cincinnati Bell Inc. (NYSE:CBB).
Do Hedge Funds Think CBB Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CBB over the last 21 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, Water Island Capital was the largest shareholder of Cincinnati Bell Inc. (NYSE:CBB), with a stake worth $31.5 million reported as of the end of September. Trailing Water Island Capital was Millennium Management, which amassed a stake valued at $23.4 million. Pentwater Capital Management, GAMCO Investors, and GLG 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 Water Island Capital allocated the biggest weight to Cincinnati Bell Inc. (NYSE:CBB), around 2.67% of its 13F portfolio. Pentwater Capital Management is also relatively very bullish on the stock, setting aside 0.29 percent of its 13F equity portfolio to CBB.
As industrywide interest jumped, key hedge funds have jumped into Cincinnati Bell Inc. (NYSE:CBB) headfirst. Winton Capital Management, managed by David Harding, initiated the most valuable position in Cincinnati Bell Inc. (NYSE:CBB). Winton Capital Management had $6.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $3.7 million investment in the stock during the quarter. The other funds with new positions in the stock are George Soros’s Soros Fund Management, John Bader’s Halcyon Asset Management, and Benjamin A. Smith’s Laurion Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cincinnati Bell Inc. (NYSE:CBB) but similarly valued. We will take a look at First Commonwealth Financial Corporation (NYSE:FCF), Endo International plc (NASDAQ:ENDP), Orion Engineered Carbons SA (NYSE:OEC), Textainer Group Holdings Limited (NYSE:TGH), Seritage Growth Properties (NYSE:SRG), Phoenix Tree Holdings Limited (NYSE:DNK), and Nantkwest Inc (NASDAQ:NK). This group of stocks’ market values are similar to CBB’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $135 million in CBB’s case. Orion Engineered Carbons SA (NYSE:OEC) is the most popular stock in this table. On the other hand Phoenix Tree Holdings Limited (NYSE:DNK) is the least popular one with only 3 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. Our overall hedge fund sentiment score for CBB is 74.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately CBB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CBB were disappointed as the stock returned 1.4% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.