There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Constellium SE (NYSE:CSTM).
Is Constellium SE (NYSE:CSTM) the right investment to pursue these days? The best stock pickers are taking a bearish view. The number of long hedge fund positions dropped by 4 recently. Our calculations also showed that CSTM isn’t among the 30 most popular stocks among hedge funds (see the video below). CSTM was in 37 hedge funds’ portfolios at the end of the second quarter of 2019. There were 41 hedge funds in our database with CSTM holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the recent hedge fund action surrounding Constellium SE (NYSE:CSTM).
How are hedge funds trading Constellium SE (NYSE:CSTM)?
At Q2’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CSTM over the last 16 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.
More specifically, Nut Tree Capital was the largest shareholder of Constellium SE (NYSE:CSTM), with a stake worth $36.5 million reported as of the end of March. Trailing Nut Tree Capital was Park West Asset Management, which amassed a stake valued at $32 million. Kingdon Capital, Rubric Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Constellium SE (NYSE:CSTM) has experienced falling interest from hedge fund managers, logic holds that there were a few fund managers who were dropping their positions entirely last quarter. Intriguingly, Sander Gerber’s Hudson Bay Capital Management dropped the largest position of the 750 funds watched by Insider Monkey, comprising about $3.7 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund sold off about $3.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 4 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Constellium SE (NYSE:CSTM). These stocks are Turning Point Therapeutics, Inc. (NASDAQ:TPTX), GreenTree Hospitality Group Ltd. (NYSE:GHG), Mobile Mini Inc (NASDAQ:MINI), and Career Education Corp. (NASDAQ:CECO). This group of stocks’ market valuations are similar to CSTM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TPTX | 15 | 323179 | 15 |
| GHG | 5 | 31776 | -4 |
| MINI | 15 | 91898 | 1 |
| CECO | 22 | 216393 | 0 |
| Average | 14.25 | 165812 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $341 million in CSTM’s case. Career Education Corp. (NASDAQ:CECO) is the most popular stock in this table. On the other hand GreenTree Hospitality Group Ltd. (NYSE:GHG) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Constellium SE (NYSE:CSTM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CSTM as the stock returned 26.6% during Q3 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.
