Is United States Cellular Corporation (USM) A Good Stock To Buy?

Reymerlyn Martin

Fri, Jun 28, 2019, 7:15 PM

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about United States Cellular Corporation (NYSE:USM) in this article.

Is United States Cellular Corporation (NYSE:USM) the right investment to pursue these days? Hedge funds are selling. The number of long hedge fund positions went down by 3 in recent months. Our calculations also showed that USM isn't among the 30 most popular stocks among hedge funds.

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 new hedge fund action regarding United States Cellular Corporation (NYSE:USM).

What have hedge funds been doing with United States Cellular Corporation (NYSE:USM)?

Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in USM over the last 15 quarters. 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, GAMCO Investors held the most valuable stake in United States Cellular Corporation (NYSE:USM), which was worth $93.4 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $42.8 million worth of shares. Moreover, Arrowstreet Capital, Millennium Management, and AQR Capital Management were also bullish on United States Cellular Corporation (NYSE:USM), allocating a large percentage of their portfolios to this stock.

Judging by the fact that United States Cellular Corporation (NYSE:USM) has faced a decline in interest from the aggregate hedge fund industry, it's easy to see that there is a sect of hedge funds who sold off their positions entirely in the third quarter. At the top of the heap, David Costen Haley's HBK Investments said goodbye to the biggest position of the "upper crust" of funds watched by Insider Monkey, comprising close to $0.7 million in stock. Hoon Kim's fund, Quantinno Capital, also sold off its stock, about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 3 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 United States Cellular Corporation (NYSE:USM) but similarly valued. These stocks are Wright Medical Group N.V. (NASDAQ:WMGI), Amedisys Inc (NASDAQ:AMED), IBERIABANK Corporation (NASDAQ:IBKC), and Agios Pharmaceuticals Inc (NASDAQ:AGIO). This group of stocks' market caps match USM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WMGI,35,889529,2 AMED,26,295842,-6 IBKC,26,194750,2 AGIO,22,316343,5 Average,27.25,424116,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $424 million. That figure was $183 million in USM's case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand Agios Pharmaceuticals Inc (NASDAQ:AGIO) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks United States Cellular Corporation (NYSE:USM) is even less popular than AGIO. Hedge funds clearly dropped the ball on USM as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on USM as the stock returned 9% during the same period and outperformed the market by an even larger margin.

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

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