Should You Avoid Cable One Inc (NYSE:CABO)?

Nina Todic

Mon, Apr 22, 2019, 6:29 PM

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Cable One Inc (NYSE:CABO)? The smart money sentiment can provide an answer to this question.

Cable One Inc (NYSE:CABO) investors should be aware of a decrease in enthusiasm from smart money of late. Our calculations also showed that cabo isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

We're going to analyze the latest hedge fund action encompassing Cable One Inc (NYSE:CABO).

What have hedge funds been doing with Cable One Inc (NYSE:CABO)?

Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in CABO 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.

The largest stake in Cable One Inc (NYSE:CABO) was held by SQ Advisors, which reported holding $281.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $186.6 million position. Other investors bullish on the company included Wallace Capital Management, GLG Partners, and Balyasny Asset Management.

Due to the fact that Cable One Inc (NYSE:CABO) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of fund managers who sold off their entire stakes last quarter. At the top of the heap, Israel Englander's Millennium Management cut the biggest stake of the 700 funds monitored by Insider Monkey, totaling close to $4.9 million in stock, and Joel Greenblatt's Gotham Asset Management was right behind this move, as the fund dumped about $1.8 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds last quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cable One Inc (NYSE:CABO) but similarly valued. We will take a look at Leggett & Platt, Inc. (NYSE:LEG), MDU Resources Group Inc (NYSE:MDU), Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI), and Aluminum Corp. of China Limited (NYSE:ACH). This group of stocks' market valuations are closest to CABO's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LEG,9,34308,-1 MDU,24,202819,5 SHI,6,13185,0 ACH,4,4511,2 Average,10.75,63706,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $562 million in CABO's case. MDU Resources Group Inc (NYSE:MDU) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 4 bullish hedge fund positions. Cable One Inc (NYSE:CABO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on CABO as the stock returned 23.6% and outperformed the market as well.

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

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