Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of CarGurus, Inc. (NASDAQ:CARG) based on that data.
CarGurus, Inc. (NASDAQ:CARG) has experienced an increase in activity from the world’s largest hedge funds of late. CarGurus, Inc. (NASDAQ:CARG) was in 25 hedge funds’ portfolios at the end of September. The all time high for this statistic is 33. Our calculations also showed that CARG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to view the recent hedge fund action regarding CarGurus, Inc. (NASDAQ:CARG).
Roger Ibbotson of Zebra Capital Management
Do Hedge Funds Think CARG Is A Good Stock To Buy Now?
At third quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 32 hedge funds with a bullish position in CARG a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, PAR Capital Management was the largest shareholder of CarGurus, Inc. (NASDAQ:CARG), with a stake worth $62.5 million reported as of the end of September. Trailing PAR Capital Management was Scopus Asset Management, which amassed a stake valued at $45.9 million. Two Sigma Advisors, No Street Capital, and Ararat 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 Ararat Capital allocated the biggest weight to CarGurus, Inc. (NASDAQ:CARG), around 7.3% of its 13F portfolio. Hidden Lake Asset Management is also relatively very bullish on the stock, earmarking 4.99 percent of its 13F equity portfolio to CARG.
As industrywide interest jumped, key hedge funds have jumped into CarGurus, Inc. (NASDAQ:CARG) headfirst. Scopus Asset Management, managed by Alexander Mitchell, created the largest position in CarGurus, Inc. (NASDAQ:CARG). Scopus Asset Management had $45.9 million invested in the company at the end of the quarter. Raffi Tokatlian’s Ararat Capital also initiated a $20.7 million position during the quarter. The other funds with new positions in the stock are Leonard Green’s Leonard Green & Partners, Peter Algert’s Algert Global, and Roger Ibbotson’s Zebra Capital Management.
Let’s check out hedge fund activity in other stocks similar to CarGurus, Inc. (NASDAQ:CARG). We will take a look at 23andMe Holding Co. (NASDAQ:ME), Avnet, Inc. (NASDAQ:AVT), Magnite Inc. (NASDAQ:MGNI), Commercial Metals Company (NYSE:CMC), Outfront Media Inc (NYSE:OUT), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), and Allogene Therapeutics, Inc. (NASDAQ:ALLO). This group of stocks’ market valuations resemble CARG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ME | 14 | 56780 | -11 |
| AVT | 25 | 703731 | -3 |
| MGNI | 26 | 217071 | -3 |
| CMC | 19 | 181681 | -3 |
| OUT | 35 | 688851 | 4 |
| RETA | 13 | 184435 | -5 |
| ALLO | 21 | 205580 | -5 |
| Average | 21.9 | 319733 | -3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $320 million. That figure was $282 million in CARG’s case. Outfront Media Inc (NYSE:OUT) is the most popular stock in this table. On the other hand Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is the least popular one with only 13 bullish hedge fund positions. CarGurus, Inc. (NASDAQ:CARG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CARG is 57. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Hedge funds were also right about betting on CARG as the stock returned 17.2% since the end of Q3 (through 12/9) 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.
