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Were Hedge Funds Right About Piling Into Comtech Telecommunications Corp. (CMTL)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Comtech Telecommunications Corp. (NASDAQ:CMTL) and determine whether the smart money was really smart about this stock.

Is Comtech Telecommunications Corp. (NASDAQ:CMTL) undervalued? Prominent investors were becoming hopeful. The number of bullish hedge fund bets improved by 1 lately. Our calculations also showed that CMTL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). CMTL was in 18 hedge funds’ portfolios at the end of March. There were 17 hedge funds in our database with CMTL positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are a lot of metrics stock traders can use to appraise publicly traded companies. A couple of the most under-the-radar metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best money managers can beat the broader indices by a superb margin (see the details here).

Joe Huber - Huber Capital Management

Joe Huber of Huber Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to review the fresh hedge fund action encompassing Comtech Telecommunications Corp. (NASDAQ:CMTL).

How have hedgies been trading Comtech Telecommunications Corp. (NASDAQ:CMTL)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in CMTL a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Huber Capital Management held the most valuable stake in Comtech Telecommunications Corp. (NASDAQ:CMTL), which was worth $14.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $11 million worth of shares. Rubric Capital Management, Royce & Associates, and Alpine Associates were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Huber Capital Management allocated the biggest weight to Comtech Telecommunications Corp. (NASDAQ:CMTL), around 2.62% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, setting aside 1.11 percent of its 13F equity portfolio to CMTL.

As one would reasonably expect, key hedge funds have been driving this bullishness. Rubric Capital Management, managed by David Rosen, assembled the most valuable position in Comtech Telecommunications Corp. (NASDAQ:CMTL). Rubric Capital Management had $7 million invested in the company at the end of the quarter. Robert Emil Zoellner’s Alpine Associates also made a $3.5 million investment in the stock during the quarter. The following funds were also among the new CMTL investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Greg Eisner’s Engineers Gate Manager, and Marc Majzner’s Clearline Capital.

Let’s now review hedge fund activity in other stocks similar to Comtech Telecommunications Corp. (NASDAQ:CMTL). We will take a look at Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX), Farmers National Banc Corp (NASDAQ:FMNB), SiTime Corporation (NASDAQ:SITM), and Allot Ltd. (NASDAQ:ALLT). This group of stocks’ market valuations are similar to CMTL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PGNX 12 43464 2
FMNB 9 14554 0
SITM 3 12026 -1
ALLT 13 107352 3
Average 9.25 44349 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $50 million in CMTL’s case. Allot Ltd. (NASDAQ:ALLT) is the most popular stock in this table. On the other hand SiTime Corporation (NASDAQ:SITM) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Comtech Telecommunications Corp. (NASDAQ:CMTL) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately CMTL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CMTL were disappointed as the stock returned 24.6% since the end of the first quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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