Is USM A Good Stock To Buy Now?

In this article we will check out the progression of hedge fund sentiment towards United States Cellular Corporation (NYSE:USM) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is USM a good stock to buy now? United States Cellular Corporation (NYSE:USM) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 21. USM has seen a decrease in enthusiasm from smart money of late. There were 16 hedge funds in our database with USM positions at the end of the second quarter. Our calculations also showed that USM 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 the financial world there are many formulas stock market investors have at their disposal to grade stocks. Some of the most underrated formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite fund managers can trounce the market by a superb margin (see the details here).

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

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. Now let’s review the fresh hedge fund action regarding United States Cellular Corporation (NYSE:USM).

Do Hedge Funds Think USM Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in USM over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is USM A Good Stock To Buy?

The largest stake in United States Cellular Corporation (NYSE:USM) was held by GAMCO Investors, which reported holding $40.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $22 million position. Other investors bullish on the company included Empyrean Capital Partners, AQR Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Sandell Asset Management allocated the biggest weight to United States Cellular Corporation (NYSE:USM), around 0.89% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.45 percent of its 13F equity portfolio to USM.

Seeing as United States Cellular Corporation (NYSE:USM) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few hedge funds that slashed their positions entirely by the end of the third quarter. Interestingly, Sander Gerber’s Hudson Bay Capital Management sold off the biggest position of all the hedgies watched by Insider Monkey, valued at about $2.5 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also cut its stock, about $0.7 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to United States Cellular Corporation (NYSE:USM). We will take a look at SINA Corp (NASDAQ:SINA), Afya Limited (NASDAQ:AFYA), Progyny, Inc. (NASDAQ:PGNY), Chart Industries, Inc. (NASDAQ:GTLS), Seres Therapeutics Inc (NASDAQ:MCRB), StepStone Group Inc. (NASDAQ:STEP), and Ping Identity Holding Corp. (NYSE:PING). This group of stocks’ market values resemble USM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SINA 22 176746 6
AFYA 6 52155 0
PGNY 20 116628 1
GTLS 20 223347 -2
MCRB 12 190096 7
STEP 15 83624 15
PING 11 73051 -4
Average 15.1 130807 3.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $93 million in USM’s case. SINA Corp (NASDAQ:SINA) is the most popular stock in this table. On the other hand Afya Limited (NASDAQ:AFYA) is the least popular one with only 6 bullish hedge fund positions. United States Cellular Corporation (NYSE:USM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for USM is 42.4. 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 negative signal and 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 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately USM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); USM investors were disappointed as the stock returned 3.6% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.

Follow United States Cellular Corp (NYSE:USM)

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