Hedge Funds Have Never Been This Bullish On Cogent Communications Holdings, Inc. (CCOI)

Nina Todic

Wed, Jun 19, 2019, 6:46 PM

How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Cogent Communications Holdings, Inc. (NASDAQ:CCOI).

Is Cogent Communications Holdings, Inc. (NASDAQ:CCOI) undervalued? Money managers are becoming more confident. The number of long hedge fund bets went up by 2 lately. Our calculations also showed that ccoi isn't among the 30 most popular stocks among hedge funds. CCOI was in 19 hedge funds' portfolios at the end of March. There were 17 hedge funds in our database with CCOI holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

We're going to take a look at the fresh hedge fund action encompassing Cogent Communications Holdings, Inc. (NASDAQ:CCOI).

Hedge fund activity in Cogent Communications Holdings, Inc. (NASDAQ:CCOI)

Heading into the second quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CCOI over the last 15 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in Cogent Communications Holdings, Inc. (NASDAQ:CCOI) was held by Renaissance Technologies, which reported holding $183.2 million worth of stock at the end of March. It was followed by GLG Partners with a $26.3 million position. Other investors bullish on the company included Winton Capital Management, Millennium Management, and Skylands Capital.

As aggregate interest increased, key money managers have been driving this bullishness. D E Shaw, managed by D. E. Shaw, assembled the most valuable position in Cogent Communications Holdings, Inc. (NASDAQ:CCOI). D E Shaw had $1 million invested in the company at the end of the quarter. Cliff Asness's AQR Capital Management also made a $0.4 million investment in the stock during the quarter. The other funds with brand new CCOI positions are Jeffrey Talpins's Element Capital Management, Brandon Haley's Holocene Advisors, and Hoon Kim's Quantinno Capital.

Let's check out 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 Switch, Inc. (NYSE:SWCH), John Wiley & Sons Inc (NYSE:JW), Kosmos Energy Ltd (NYSE:KOS), and International Bancshares Corp (NASDAQ:IBOC). This group of stocks' market values match CCOI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SWCH,16,175891,2 JW,17,77690,0 KOS,18,118384,4 IBOC,14,151399,-5 Average,16.25,130841,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $264 million in CCOI's case. Kosmos Energy Ltd (NYSE:KOS) is the most popular stock in this table. On the other hand International Bancshares Corp (NASDAQ:IBOC) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Cogent Communications Holdings, Inc. (NASDAQ:CCOI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on CCOI as the stock returned 7.5% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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