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Is Commscope Holding Company Inc (COMM) A Good Stock To Buy?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Commscope Holding Company Inc (NASDAQ:COMM).

Commscope Holding Company Inc (NASDAQ:COMM) was in 28 hedge funds’ portfolios at the end of the fourth quarter of 2018. COMM investors should pay attention to a decrease in enthusiasm from smart money of late. There were 31 hedge funds in our database with COMM positions at the end of the previous quarter. Our calculations also showed that COMM isn’t among the 30 most popular stocks among hedge funds.

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 32 percentage points since May 2014 through March 12, 2019 (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.

Andrew Raab FPR Partners Andy Raab

Andrew Raab of FPR Partners

We’re going to review the new hedge fund action regarding Commscope Holding Company Inc (NASDAQ:COMM).

What does the smart money think about Commscope Holding Company Inc (NASDAQ:COMM)?

Heading into the first quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in COMM over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

COMM_may2019

Among these funds, FPR Partners held the most valuable stake in Commscope Holding Company Inc (NASDAQ:COMM), which was worth $183.2 million at the end of the fourth quarter. On the second spot was Maverick Capital which amassed $159.8 million worth of shares. Moreover, Route One Investment Company, Levin Capital Strategies, and Citadel Investment Group were also bullish on Commscope Holding Company Inc (NASDAQ:COMM), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Commscope Holding Company Inc (NASDAQ:COMM) has faced falling interest from the smart money, we can see that there exists a select few funds that slashed their positions entirely in the third quarter. Intriguingly, Clifton S. Robbins’s Blue Harbour Group cut the biggest investment of the 700 funds watched by Insider Monkey, worth an estimated $71.9 million in stock, and Barry Lebovits and Joshua Kuntz’s Rivulet Capital was right behind this move, as the fund cut about $35.9 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Commscope Holding Company Inc (NASDAQ:COMM). We will take a look at GW Pharmaceuticals plc (NASDAQ:GWPH), Louisiana-Pacific Corporation (NYSE:LPX), Macquarie Infrastructure Corporation (NYSE:MIC), and Cushman & Wakefield plc (NYSE:CWK). This group of stocks’ market values resemble COMM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GWPH 25 369097 7
LPX 31 426583 3
MIC 28 243274 3
CWK 13 142027 -2
Average 24.25 295245 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $295 million. That figure was $888 million in COMM’s case. Louisiana-Pacific Corporation (NYSE:LPX) is the most popular stock in this table. On the other hand Cushman & Wakefield plc (NYSE:CWK) is the least popular one with only 13 bullish hedge fund positions. Commscope Holding Company Inc (NASDAQ:COMM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on COMM as the stock returned 58.6% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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