Do Hedge Funds Love Credit Suisse Group AG (ADR) (CS)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe the hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Credit Suisse Group AG (ADR) (NYSE:CS)? The smart money sentiment can provide an answer to this question.

Credit Suisse Group AG (ADR) (NYSE:CS) was in 7 hedge funds’ portfolios at the end of the third quarter of 2015 and even though the stock lost 21% since the beginning of the third quarter, the number of funds with long positions inched down by one. Moreover, at the end of this article we will also compare CS to other stocks, including LyondellBasell Industries NV (NYSE:LYB), Suncor Energy Inc. (USA) (NYSE:SU), and Cognizant Technology Solutions Corp (NASDAQ:CTSH) to get a better sense of its popularity.

To most market participants, hedge funds are seen as worthless, outdated investment tools of years past. While there are more than an 8000 funds with their doors open at the moment, Our experts choose to focus on the masters of this group, about 700 funds. These hedge fund managers manage the majority of the hedge fund industry’s total capital, and by keeping an eye on their inimitable investments, Insider Monkey has brought to light a number of investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Keeping this in mind, let’s take a look at the recent action encompassing Credit Suisse Group AG (ADR) (NYSE:CS).

How have hedgies been trading Credit Suisse Group AG (ADR) (NYSE:CS)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock and with hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management has the largest position in Credit Suisse Group AG (ADR) (NYSE:CS), worth close to $249.7 million, amounting to 0.5% of its total 13F portfolio. Coming in second is PEAK6 Capital Management, managed by Matthew Hulsizer, which holds a $15.4 million call position; 0.1% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish, encompass Mike Vranos’s Ellington and David Dreman’s Dreman Value Management.

Now, key hedge funds were breaking ground themselves. PEAK6 Capital Management also established the largest position in Credit Suisse Group AG (ADR) (NYSE:CS). PEAK6 Capital Management had $2.7 million worth of the company’s shares at the end of the quarter.Ellington also initiated a $1.8 million position during the quarter. The only other fund with a brand new CS position is Israel Englander’s Millennium Management.

Let’s also examine hedge fund activity in other stocks similar to Credit Suisse Group AG (ADR) (NYSE:CS). These stocks are LyondellBasell Industries NV (NYSE:LYB), Suncor Energy Inc. (USA) (NYSE:SU), Cognizant Technology Solutions Corp (NASDAQ:CTSH), and Aetna Inc. (NYSE:AET). This group of stocks’ market valuations are similar to CS’s market valuation.

As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $2.73 billion. That figure was just $272 million in CS’s case. Aetna Inc. (NYSE:AET) is the most popular stock in this table. On the other hand Suncor Energy Inc. (USA) (NYSE:SU) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Credit Suisse Group AG (ADR) (NYSE:CS) is even less popular than SU. Considering that hedge funds aren’t fond of this stock in relation to 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.