Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
One stock that registered an increase in popularity among investors in our database is Civitas Solutions Inc (NYSE:CIVI). At the end of September, eight funds held shares of the company. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as MGP Ingredients Inc (NASDAQ:MGPI), Echo Global Logistics, Inc. (NASDAQ:ECHO), and CommerceHub Inc (NASDAQ:CHUBA) to gather more data points.
Follow Civitas Solutions Inc. (NYSE:CIVI)
Follow Civitas Solutions Inc. (NYSE:CIVI)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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With all of this in mind, let’s go over the recent action regarding Civitas Solutions Inc (NYSE:CIVI).
Hedge fund activity in Civitas Solutions Inc (NYSE:CIVI)
Heading into the fourth quarter of 2016, eight funds tracked by Insider Monkey were long this stock, up by one over the quarter. Below, you can check out the change in hedge fund sentiment towards CIVI over the last five 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.
When looking at the institutional investors followed by Insider Monkey, Stadium Capital Management, led by Alexander Medina Seaver, holds the largest position in Civitas Solutions Inc (NYSE:CIVI). Stadium Capital Management has a $5.4 million position in the stock, comprising 1.7% of its 13F portfolio. On Stadium Capital Management’s heels is Citadel Investment Group, led by Ken Griffin, which holds a $1.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include Richard Driehaus’ Driehaus Capital, Chuck Royce’s Royce & Associates, and Millennium Management, one of the 10 largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, specific money managers have been driving this bullishness. Stadium Capital Management, led by Alexander Medina Seaver, assembled the biggest position in Civitas Solutions Inc (NYSE:CIVI). Stadium Capital Management had $5.4 million invested in the company at the end of the quarter. Millennium Management also made a $0.5 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks similar to Civitas Solutions Inc (NYSE:CIVI). These stocks are MGP Ingredients Inc (NASDAQ:MGPI), Echo Global Logistics, Inc. (NASDAQ:ECHO), CommerceHub Inc (NASDAQ:CHUBA), and Heron Therapeutics Inc (NASDAQ:HRTX). This group of stocks’ market caps are closest to CIVI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MGPI | 8 | 53307 | 1 |
| ECHO | 9 | 38125 | -1 |
| CHUBA | 18 | 39195 | 18 |
| HRTX | 12 | 379923 | 2 |
As you can see these stocks had an average of 12 funds with bullish positions and the average amount invested in these stocks was $128 million. That figure was $10 million in CIVI’s case. CommerceHub Inc (NASDAQ:CHUBA) is the most popular stock in this table. On the other hand MGP Ingredients Inc (NASDAQ:MGPI) is the least popular one with only eight funds holding shares. Compared to these stocks Civitas Solutions Inc (NYSE:CIVI) registered the same number of bullish investors as MGP Ingredients. Considering that hedge funds aren’t fond of this stock in relation to the majority of other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: none
