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Were Hedge Funds Right About Flocking Into Cogent Communications Holdings, Inc. (CCOI) ?

At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Is Cogent Communications Holdings, Inc. (NASDAQ:CCOI) going to take off soon? Prominent investors are betting on the stock. The number of bullish hedge fund positions advanced by 5 recently. Our calculations also showed that ccoi isn’t among the 30 most popular stocks among hedge funds. CCOI was in 17 hedge funds’ portfolios at the end of December. There were 12 hedge funds in our database with CCOI positions at the end of the previous quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

David Harding

We’re going to check out the key hedge fund action surrounding Cogent Communications Holdings, Inc. (NASDAQ:CCOI).

What does the smart money think about Cogent Communications Holdings, Inc. (NASDAQ:CCOI)?

Heading into the first quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 42% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CCOI over the last 14 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.

No of Hedge Funds with CCOI Positions

Of the funds tracked by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the largest position in Cogent Communications Holdings, Inc. (NASDAQ:CCOI). Renaissance Technologies has a $154.3 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is GLG Partners, led by Noam Gottesman, holding a $21.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include David Harding’s Winton Capital Management, Charles Paquelet’s Skylands Capital and Genevieve Kahr’s Ailanthus Capital Management.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Ailanthus Capital Management, managed by Genevieve Kahr, established the biggest position in Cogent Communications Holdings, Inc. (NASDAQ:CCOI). Ailanthus Capital Management had $4.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $3.9 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks similar to Cogent Communications Holdings, Inc. (NASDAQ:CCOI). These stocks are Apergy Corporation (NYSE:APY), Vonage Holdings Corp. (NYSE:VG), Applied Industrial Technologies, Inc. (NYSE:AIT), and Evertec Inc (NYSE:EVTC). This group of stocks’ market values match CCOI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APY 13 115501 -7
VG 22 154896 -4
AIT 20 101502 -4
EVTC 21 224095 1
Average 19 148999 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $219 million in CCOI’s case. Vonage Holdings Corp. (NYSE:VG) is the most popular stock in this table. On the other hand Apergy Corporation (NYSE:APY) is the least popular one with only 13 bullish hedge fund positions. Cogent Communications Holdings, Inc. (NASDAQ:CCOI) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on CCOI as the stock returned 26.6% and outperformed the market by an even larger margin.

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

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