Were Hedge Funds Right About Cogent Communications Holdings Inc. (CCOI)?
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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Cogent Communications Holdings Inc. (NASDAQ:CCOI) changed recently.
Cogent Communications Holdings Inc. (NASDAQ:CCOI) has experienced a decrease in support from the world's most elite money managers recently. Cogent Communications Holdings Inc. (NASDAQ:CCOI) was in 18 hedge funds' portfolios at the end of March. The all time high for this statistic is 30. Our calculations also showed that CCOI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are numerous gauges shareholders have at their disposal to value their holdings. A pair of the less known gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the S&P 500 by a healthy margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
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Do Hedge Funds Think CCOI Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the fourth quarter of 2020. By comparison, 27 hedge funds held shares or bullish call options in CCOI a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in Cogent Communications Holdings Inc. (NASDAQ:CCOI), worth close to $156.4 million, amounting to 0.2% of its total 13F portfolio. The second largest stake is held by MIG Capital, led by Richard Merage, holding a $61 million position; the fund has 6% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Mark Coe's Intrinsic Edge Capital, Charles Paquelet's Skylands Capital and Noam Gottesman's GLG Partners. In terms of the portfolio weights assigned to each position MIG Capital allocated the biggest weight to Cogent Communications Holdings Inc. (NASDAQ:CCOI), around 6.02% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, earmarking 3.42 percent of its 13F equity portfolio to CCOI.
Since Cogent Communications Holdings Inc. (NASDAQ:CCOI) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there were a few funds that decided to sell off their entire stakes in the first quarter. Intriguingly, D. E. Shaw's D E Shaw sold off the biggest stake of the "upper crust" of funds followed by Insider Monkey, valued at about $5.5 million in stock, and Charles Montanaro's Montanaro Asset Management was right behind this move, as the fund dumped about $2.7 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 5 funds in the first quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cogent Communications Holdings Inc. (NASDAQ:CCOI) but similarly valued. These stocks are Associated Banc Corp (NYSE:ASB), GrafTech International Ltd. (NYSE:EAF), Compania Cervecerias Unidas S.A. (NYSE:CCU), MakeMyTrip Limited (NASDAQ:MMYT), Berkeley Lights, Inc. (NASDAQ:BLI), Fluor Corporation (NYSE:FLR), and Apple Hospitality REIT Inc (NYSE:APLE). This group of stocks' market values resemble CCOI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASB,24,221388,2 EAF,38,416723,6 CCU,7,22493,-1 MMYT,9,49170,2 BLI,16,410653,0 FLR,17,199311,-3 APLE,17,203355,1 Average,18.3,217585,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $320 million in CCOI's case. GrafTech International Ltd. (NYSE:EAF) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 7 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 overall hedge fund sentiment score for CCOI is 35.7. 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. 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 28.5% in 2021 through July 23rd and beat the market by 10.1 percentage points. A small number of hedge funds were also right about betting on CCOI, though not to the same extent, as the stock returned 13.2% since the end of Q1 (through July 23rd) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
