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 Comtech Telecommunications Corp. (NASDAQ:CMTL)? The smart money sentiment can provide an answer to this question.
Is CMTL a good stock to buy now? Comtech Telecommunications Corp. (NASDAQ:CMTL) investors should be aware of a decrease in activity from the world's largest hedge funds recently. Comtech Telecommunications Corp. (NASDAQ:CMTL) was in 12 hedge funds' portfolios at the end of September. The all time high for this statistics is 20. Our calculations also showed that CMTL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are plenty of signals stock market investors can use to analyze their holdings. A couple of the most innovative signals are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outclass the broader indices by a healthy amount (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. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Now let's view the latest hedge fund action surrounding Comtech Telecommunications Corp. (NASDAQ:CMTL).
Do Hedge Funds Think CMTL Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CMTL over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Comtech Telecommunications Corp. (NASDAQ:CMTL) was held by Huber Capital Management, which reported holding $12 million worth of stock at the end of September. It was followed by Royce & Associates with a $6.7 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Huber Capital Management allocated the biggest weight to Comtech Telecommunications Corp. (NASDAQ:CMTL), around 4.42% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.1 percent of its 13F equity portfolio to CMTL.
Because Comtech Telecommunications Corp. (NASDAQ:CMTL) has witnessed a decline in interest from the smart money, it's safe to say that there were a few funds that decided to sell off their full holdings in the third quarter. At the top of the heap, Robert Emil Zoellner's Alpine Associates dumped the biggest position of the "upper crust" of funds watched by Insider Monkey, totaling about $4 million in stock. Peter Muller's fund, PDT Partners, also dumped its stock, about $0.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Comtech Telecommunications Corp. (NASDAQ:CMTL) but similarly valued. These stocks are Cadiz Inc (NASDAQ:CDZI), Experience Investment Corp. (NASDAQ:EXPC), Orchid Island Capital, Inc. (NYSE:ORC), Osmotica Pharmaceuticals plc (NASDAQ:OSMT), HF Foods Group Inc. (NASDAQ:HFFG), Cytosorbents Corp (NASDAQ:CTSO), and Bridge Bancorp, Inc. (NASDAQ:BDGE). This group of stocks' market caps match CMTL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDZI,7,5833,-2 EXPC,19,95338,6 ORC,4,11068,0 OSMT,9,20041,-1 HFFG,2,2156,-1 CTSO,13,48671,4 BDGE,12,54568,3 Average,9.4,33954,1.3 [/table]
As you can see these stocks had an average of 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $36 million in CMTL's case. Experience Investment Corp. (NASDAQ:EXPC) is the most popular stock in this table. On the other hand HF Foods Group Inc. (NASDAQ:HFFG) is the least popular one with only 2 bullish hedge fund positions. Comtech Telecommunications Corp. (NASDAQ:CMTL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CMTL is 51.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on CMTL as the stock returned 42.6% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
