Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Telephone & Data Systems, Inc. (NYSE:TDS).
Is TDS stock a buy? Hedge funds were getting less optimistic. The number of bullish hedge fund positions retreated by 3 in recent months. Telephone & Data Systems, Inc. (NYSE:TDS) was in 24 hedge funds’ portfolios at the end of December. The all time high for this statistic is 29. Our calculations also showed that TDS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 go over the recent hedge fund action surrounding Telephone & Data Systems, Inc. (NYSE:TDS).
Do Hedge Funds Think TDS Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in TDS over the last 22 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Telephone & Data Systems, Inc. (NYSE:TDS) was held by Renaissance Technologies, which reported holding $45.1 million worth of stock at the end of December. It was followed by Empyrean Capital Partners with a $36.9 million position. Other investors bullish on the company included GAMCO Investors, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Game Creek Capital allocated the biggest weight to Telephone & Data Systems, Inc. (NYSE:TDS), around 1.47% of its 13F portfolio. Empyrean Capital Partners is also relatively very bullish on the stock, setting aside 1.21 percent of its 13F equity portfolio to TDS.
Judging by the fact that Telephone & Data Systems, Inc. (NYSE:TDS) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds who were dropping their entire stakes in the fourth quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management cut the largest position of all the hedgies watched by Insider Monkey, valued at close to $0.6 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund dropped about $0.5 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds in the fourth quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Telephone & Data Systems, Inc. (NYSE:TDS) but similarly valued. We will take a look at Axonics Modulation Technologies, Inc. (NASDAQ:AXNX), Nova Measuring Instruments Ltd. (NASDAQ:NVMI), SJW Corp. (NYSE:SJW), World Fuel Services Corporation (NYSE:INT), Grupo Simec S.A.B. de C.V. (NYSE:SIM), Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), and Viela Bio, Inc. (NASDAQ:VIE). This group of stocks’ market valuations match TDS’s market valuation.
|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 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $211 million in TDS’s case. Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSE:SIM) is the least popular one with only 1 bullish hedge fund positions. Telephone & Data Systems, Inc. (NYSE:TDS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TDS is 59.7. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on TDS as the stock returned 29.2% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.