While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Calgon Carbon Corporation (NYSE:CCC) and see how the stock performed in comparison to hedge funds’ consensus picks.
Calgon Carbon Corporation (NYSE:CCC) was in 38 hedge funds’ portfolios at the end of the third quarter of 2019. CCC investors should pay attention to an increase in hedge fund interest recently. There were 21 hedge funds in our database with CCC positions at the end of the previous quarter. Our calculations also showed that CCC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Daniel Sundheim of D1 Capital Partners
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a glance at the key hedge fund action surrounding Calgon Carbon Corporation (NYSE:CCC).
How have hedgies been trading Calgon Carbon Corporation (NYSE:CCC)?
Heading into the fourth quarter of 2019, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 81% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CCC over the last 17 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Select Equity Group was the largest shareholder of Calgon Carbon Corporation (NYSE:CCC), with a stake worth $152.2 million reported as of the end of September. Trailing Select Equity Group was D1 Capital Partners, which amassed a stake valued at $100 million. Brahman Capital, JS Capital, and Tiger Eye Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Antipodean Advisors allocated the biggest weight to Calgon Carbon Corporation (NYSE:CCC), around 16.53% of its 13F portfolio. Ratan Capital Group is also relatively very bullish on the stock, earmarking 14.49 percent of its 13F equity portfolio to CCC.
As industrywide interest jumped, key money managers were breaking ground themselves. Banbury Partners, managed by Baker Burleson and Stormy Scott, initiated the most valuable position in Calgon Carbon Corporation (NYSE:CCC). Banbury Partners had $26.6 million invested in the company at the end of the quarter. Dennis Puri and Oliver Keller’s Hunt Lane Capital also made a $20.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Israel Englander’s Millennium Management, and Jeffrey Talpins’s Element Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Calgon Carbon Corporation (NYSE:CCC) but similarly valued. These stocks are Companhia Brasileira de Distrib. (NYSE:CBD), Integra Lifesciences Holdings Corp (NASDAQ:IART), GrubHub Inc (NYSE:GRUB), and Eaton Vance Corp (NYSE:EV). This group of stocks’ market values are closest to CCC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBD | 11 | 44794 | 0 |
| IART | 21 | 216426 | 0 |
| GRUB | 23 | 595061 | -9 |
| EV | 15 | 101488 | 0 |
| Average | 17.5 | 239442 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $239 million. That figure was $686 million in CCC’s case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand Companhia Brasileira de Distrib. (NYSE:CBD) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Calgon Carbon Corporation (NYSE:CCC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on CCC as the stock returned 79% so far in 2019 (through 12/23) 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
