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. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about Cogent Communications Holdings, Inc. (NASDAQ:CCOI)?
Is Cogent Communications Holdings, Inc. (NASDAQ:CCOI) worth your attention right now? Prominent investors are getting less bullish. The number of long hedge fund positions dropped by 6 in recent months. Our calculations also showed that CCOI 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). CCOI was in 24 hedge funds’ portfolios at the end of December. There were 30 hedge funds in our database with CCOI positions at the end of the previous quarter.
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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital 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. Keeping this in mind let’s take a look at the latest hedge fund action encompassing Cogent Communications Holdings, Inc. (NASDAQ:CCOI).
How have hedgies been trading Cogent Communications Holdings, Inc. (NASDAQ:CCOI)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CCOI over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Cogent Communications Holdings, Inc. (NASDAQ:CCOI), with a stake worth $236.2 million reported as of the end of September. Trailing Renaissance Technologies was MIG Capital, which amassed a stake valued at $67.3 million. GLG Partners, Zimmer Partners, and Winton 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 MIG Capital allocated the biggest weight to Cogent Communications Holdings, Inc. (NASDAQ:CCOI), around 7.38% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, dishing out 0.66 percent of its 13F equity portfolio to CCOI.
Since Cogent Communications Holdings, Inc. (NASDAQ:CCOI) has experienced a decline in interest from the smart money, it’s easy to see that there lies a certain “tier” of fund managers who were dropping their entire stakes heading into Q4. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest investment of the 750 funds watched by Insider Monkey, comprising close to $6.1 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also sold off its stock, about $0.7 million worth. These moves are important to note, as total hedge fund interest dropped by 6 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Cogent Communications Holdings, Inc. (NASDAQ:CCOI). We will take a look at Vishay Intertechnology, Inc. (NYSE:VSH), Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Atlas Corp. (NYSE:SSW), and II-VI, Inc. (NASDAQ:IIVI). This group of stocks’ market caps match CCOI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VSH | 20 | 363288 | -3 |
| SBGI | 33 | 406464 | 4 |
| SSW | 15 | 1150151 | 3 |
| IIVI | 18 | 127641 | -14 |
| Average | 21.5 | 511886 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $512 million. That figure was $405 million in CCOI’s case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand Atlas Corp. (NYSE:SSW) is the least popular one with only 15 bullish hedge fund positions. Cogent Communications Holdings, Inc. (NASDAQ:CCOI) is not the most popular stock in this group but hedge fund interest is still above 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 still beat the market by 5.5 percentage points. Hedge funds were also right about betting on CCOI as the stock returned 6.7% during the first quarter (through March 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
