There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Telephone & Data Systems, Inc. (NYSE:TDS) .
Telephone & Data Systems, Inc. (NYSE:TDS) was included in the 13F portfolios of 19 funds tracked by Insider Monkey at the end of September. TDS saw a decrease in support from the world’s most successful money managers last quarter as there had been 20 funds bullish on TDS at the end of June. 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 Blackbaud, Inc. (NASDAQ:BLKB), Eldorado Gold Corp (USA) (NYSE:EGO), and Rayonier Inc. (NYSE:RYN) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, we’re going to take a look at the new action regarding Telephone & Data Systems, Inc. (NYSE:TDS).
What does the smart money think about Telephone & Data Systems, Inc. (NYSE:TDS)?
At the end of the third quarter, 19 hedge funds tracked by Insider Monkey were bullish on this stock, down by 5% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in TDS heading into this year. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Mario Gabelli’s GAMCO Investors has the biggest position in Telephone & Data Systems, Inc. (NYSE:TDS), worth close to $95.7 million, accounting for 0.6% of its total 13F portfolio. Sitting at the No. 2 spot is Jim Simons of Renaissance Technologies, with a $70.1 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that hold long positions encompass Chuck Royce’s Royce & Associates, Hari Hariharan’s NWI Management and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually sold off their positions entirely. Intriguingly, Glenn Russell Dubin’s Highbridge Capital Management sold off the largest investment of all the investors followed by Insider Monkey, valued at an estimated $3.7 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund sold off about $0.9 million worth of shares.
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. These stocks are Blackbaud, Inc. (NASDAQ:BLKB), Eldorado Gold Corp (USA) (NYSE:EGO), Rayonier Inc. (NYSE:RYN), and Urban Outfitters, Inc. (NASDAQ:URBN). All of these stocks’ market caps are closest to TDS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 18 funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $263 million in TDS’s case. Urban Outfitters, Inc. (NASDAQ:URBN) is the most popular stock in this table. On the other hand Blackbaud, Inc. (NASDAQ:BLKB) is the least popular one with only 14 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Urban Outfitters, Inc. (NASDAQ:URBN) might be a better candidate to consider taking a long position in.