Was The Smart Money Right About Charter Communications, Inc. (CHTR)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Charter Communications, Inc. (NASDAQ:CHTR) and determine whether hedge funds had an edge regarding this stock.

Is Charter Communications, Inc. (NASDAQ:CHTR) a great investment today? The smart money was taking a bearish view. The number of bullish hedge fund bets shrunk by 1 recently. Charter Communications, Inc. (NASDAQ:CHTR) was in 74 hedge funds’ portfolios at the end of September. The all time high for this statistic is 134. Our calculations also showed that CHTR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 75 hedge funds in our database with CHTR holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s check out the new hedge fund action regarding Charter Communications, Inc. (NASDAQ:CHTR).

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

At the end of September, a total of 74 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -1% from one quarter earlier. By comparison, 88 hedge funds held shares or bullish call options in CHTR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, TCI Fund Management, managed by Chris Hohn, holds the number one position in Charter Communications, Inc. (NASDAQ:CHTR). TCI Fund Management has a $7.5369 billion position in the stock, comprising 18.1% of its 13F portfolio. The second largest stake is held by Berkshire Hathaway, managed by Warren Buffett, which holds a $3.0562 billion position; 1% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish encompass John Armitage’s Egerton Capital Limited, Rajiv Jain’s GQG Partners and Mark Massey’s AltaRock Partners. In terms of the portfolio weights assigned to each position Triple Frond Partners allocated the biggest weight to Charter Communications, Inc. (NASDAQ:CHTR), around 25.19% of its 13F portfolio. AltaRock Partners is also relatively very bullish on the stock, earmarking 23.35 percent of its 13F equity portfolio to CHTR.

Since Charter Communications, Inc. (NASDAQ:CHTR) has witnessed falling interest from hedge fund managers, we can see that there exists a select few money managers who sold off their positions entirely heading into Q4. At the top of the heap, Matthew Stadelman’s Diamond Hill Capital dropped the largest investment of all the hedgies followed by Insider Monkey, worth close to $327.8 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $114.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Charter Communications, Inc. (NASDAQ:CHTR) but similarly valued. We will take a look at Philip Morris International Inc. (NYSE:PM), Intuit Inc. (NASDAQ:INTU), Honeywell International Inc. (NYSE:HON), QUALCOMM, Incorporated (NASDAQ:QCOM), Citigroup Inc. (NYSE:C), Royal Bank of Canada (NYSE:RY), and Lowe’s Companies, Inc. (NYSE:LOW). This group of stocks’ market values are similar to CHTR’s market value.

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As you can see these stocks had an average of 54.6 hedge funds with bullish positions and the average amount invested in these stocks was $4042 million. That figure was $18794 million in CHTR’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 16 bullish hedge fund positions. Charter Communications, Inc. (NASDAQ:CHTR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CHTR is 66.6. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, CHTR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CHTR were disappointed as the stock returned -18.4% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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

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