We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like CBRE Group, Inc. (NYSE:CBRE).
CBRE Group, Inc. (NYSE:CBRE) has experienced an increase in hedge fund interest lately. CBRE was in 27 hedge funds’ portfolios at the end of the third quarter of 2019. There were 25 hedge funds in our database with CBRE holdings at the end of the previous quarter. Our calculations also showed that CBRE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Ubben of ValueAct Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the new hedge fund action surrounding CBRE Group, Inc. (NYSE:CBRE).
What have hedge funds been doing with CBRE Group, Inc. (NYSE:CBRE)?
At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the second quarter of 2019. On the other hand, there were a total of 29 hedge funds with a bullish position in CBRE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in CBRE Group, Inc. (NYSE:CBRE) was held by ValueAct Capital, which reported holding $542.1 million worth of stock at the end of September. It was followed by Cantillon Capital Management with a $366.3 million position. Other investors bullish on the company included Ariel Investments, Adage Capital Management, and McKinley Capital Management. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to CBRE Group, Inc. (NYSE:CBRE), around 5.85% of its portfolio. Cantillon Capital Management is also relatively very bullish on the stock, earmarking 3.56 percent of its 13F equity portfolio to CBRE.
As one would reasonably expect, some big names were breaking ground themselves. Castle Hook Partners, managed by Josh Donfeld and David Rogers, established the largest position in CBRE Group, Inc. (NYSE:CBRE). Castle Hook Partners had $9.8 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $8 million position during the quarter. The other funds with brand new CBRE positions are Matthew Tewksbury’s Stevens Capital Management, Israel Englander’s Millennium Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CBRE Group, Inc. (NYSE:CBRE) but similarly valued. We will take a look at Western Digital Corporation (NASDAQ:WDC), New Oriental Education & Tech Group Inc. (NYSE:EDU), Healthpeak Properties, Inc. (NYSE:HCP), and Alexandria Real Estate Equities Inc (NYSE:ARE). All of these stocks’ market caps resemble CBRE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WDC | 35 | 905397 | 10 |
| EDU | 35 | 1511145 | 3 |
| HCP | 25 | 562264 | -1 |
| ARE | 21 | 343145 | -6 |
| Average | 29 | 830488 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $830 million. That figure was $1096 million in CBRE’s case. Western Digital Corporation (NASDAQ:WDC) is the most popular stock in this table. On the other hand Alexandria Real Estate Equities Inc (NYSE:ARE) is the least popular one with only 21 bullish hedge fund positions. CBRE Group, Inc. (NYSE:CBRE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CBRE, though not to the same extent, as the stock returned 7.6% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
